Correlation Between Tamar Petroleum and Oil Refineries

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

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

Diversification Opportunities for Tamar Petroleum and Oil Refineries

0.43

Correlation Coefficient

Tamar Petroleum  Oil Refineries

Very weak diversification

The 3 months correlation between Tamar and Oil is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tamar Petroleum and Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Refineries 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 Oil Refineries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Refineries has no effect on the direction of Tamar Petroleum i.e., Tamar Petroleum and Oil Refineries go up and down completely randomly.

Pair Corralation between Tamar Petroleum and Oil Refineries

Assuming the 90 days trading horizon Tamar Petroleum is expected to generate 1.13 times more return on investment than Oil Refineries. However, Tamar Petroleum is 1.13 times more volatile than Oil Refineries. It trades about 0.04 of its potential returns per unit of risk. Oil Refineries is currently generating about 0.03 per unit of risk. If you would invest  233,700  in Tamar Petroleum on September 25, 2024 and sell it today you would earn a total of  2,900  from holding Tamar Petroleum or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Tamar Petroleum  vs.  Oil Refineries

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.

Oil Refineries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Refineries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Oil Refineries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tamar Petroleum and Oil Refineries

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

The idea behind Tamar Petroleum and Oil Refineries 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.