Correlation Between Tamar Petroleum and NewMed Energy

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

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

Diversification Opportunities for Tamar Petroleum and NewMed Energy

0.96

Correlation Coefficient

Tamar Petroleum  NewMed Energy

Almost no diversification

The 3 months correlation between Tamar and NewMed is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tamar Petroleum and NewMed Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMed Energy and Tamar 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 Tamar Petroleum are associated (or correlated) with NewMed Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMed Energy has no effect on the direction of Tamar Petroleum i.e., Tamar Petroleum and NewMed Energy go up and down completely randomly.

Pair Corralation between Tamar Petroleum and NewMed Energy

Assuming the 90 days trading horizon Tamar Petroleum is expected to generate 1.2 times more return on investment than NewMed Energy. However, Tamar Petroleum is 1.2 times more volatile than NewMed Energy . It trades about 0.23 of its potential returns per unit of risk. NewMed Energy is currently generating about 0.25 per unit of risk. If you would invest  192,600  in Tamar Petroleum on September 25, 2024 and sell it today you would earn a total of  44,000  from holding Tamar Petroleum or generate 22.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Tamar Petroleum  vs.  NewMed Energy

Tamar Petroleum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tamar Petroleum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tamar Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

NewMed Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NewMed Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NewMed Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tamar Petroleum and NewMed Energy

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

The idea behind Tamar Petroleum and NewMed Energy 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.