Correlation Between Strat Petroleum and Deep Well

Can any of the company-specific risk be diversified away by investing in both Strat Petroleum and Deep Well 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 Strat Petroleum and Deep Well into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Strat Petroleum and Deep Well Oil, you can compare the effects of market volatilities on Strat Petroleum and Deep Well 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 Strat Petroleum with a short position of Deep Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strat Petroleum and Deep Well.

Diversification Opportunities for Strat Petroleum and Deep Well

0.0

Correlation Coefficient

Strat Petroleum  Deep Well

Pay attention - limited upside

The 3 months correlation between Strat and Deep is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Strat Petroleum and Deep Well Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Well Oil and Strat Petroleum 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 Strat Petroleum are associated (or correlated) with Deep Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Well Oil has no effect on the direction of Strat Petroleum i.e., Strat Petroleum and Deep Well go up and down completely randomly.

Pair Corralation between Strat Petroleum and Deep Well

If you would invest (100.00) in Deep Well Oil on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Deep Well Oil or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Strat Petroleum  vs.  Deep Well Oil

Strat Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strat Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Strat Petroleum is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Deep Well Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deep Well Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deep Well is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Strat Petroleum and Deep Well

The main advantage of trading using opposite Strat Petroleum and Deep Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strat Petroleum position performs unexpectedly, Deep Well 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 Deep Well will offset losses from the drop in Deep Well's long position.

The idea behind Strat Petroleum and Deep Well Oil 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.