Correlation Between Southern Cross and Horizon Oil

Can any of the company-specific risk be diversified away by investing in both Southern Cross and Horizon Oil at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Southern Cross and Horizon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southern Cross Media and Horizon Oil Limited, you can compare the effects of market volatilities on Southern Cross and Horizon Oil and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Southern Cross with a short position of Horizon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Cross and Horizon Oil.

Diversification Opportunities for Southern Cross and Horizon Oil

-0.11

Correlation Coefficient

Southern Cross  Horizon Oil

Good diversification

The 3 months correlation between Southern and Horizon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Southern Cross Media and Horizon Oil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Oil Limited and Southern Cross is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Southern Cross Media are associated (or correlated) with Horizon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Oil Limited has no effect on the direction of Southern Cross i.e., Southern Cross and Horizon Oil go up and down completely randomly.

Pair Corralation between Southern Cross and Horizon Oil

Assuming the 90 days horizon Southern Cross Media is expected to under-perform the Horizon Oil. But the otc stock apears to be less risky and, when comparing its historical volatility, Southern Cross Media is 1.12 times less risky than Horizon Oil. The otc stock trades about -0.12 of its potential returns per unit of risk. The Horizon Oil Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Horizon Oil Limited on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Horizon Oil Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Southern Cross Media  vs.  Horizon Oil Limited

Southern Cross Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Cross Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Horizon Oil Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Oil Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Horizon Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Cross and Horizon Oil

The main advantage of trading using opposite Southern Cross and Horizon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Cross position performs unexpectedly, Horizon Oil can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Horizon Oil will offset losses from the drop in Horizon Oil's long position.

The idea behind Southern Cross Media and Horizon Oil Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.