Correlation Between Valeura Energy and Pantheon Resources

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

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

Diversification Opportunities for Valeura Energy and Pantheon Resources

0.75

Correlation Coefficient

Valeura Energy  Pantheon Resources

Poor diversification

The 3 months correlation between Valeura and Pantheon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Pantheon Resources Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pantheon Resources Plc and Valeura Energy 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 Valeura Energy are associated (or correlated) with Pantheon Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pantheon Resources Plc has no effect on the direction of Valeura Energy i.e., Valeura Energy and Pantheon Resources go up and down completely randomly.

Pair Corralation between Valeura Energy and Pantheon Resources

Assuming the 90 days horizon Valeura Energy is expected to generate 1.68 times less return on investment than Pantheon Resources. But when comparing it to its historical volatility, Valeura Energy is 1.34 times less risky than Pantheon Resources. It trades about 0.14 of its potential returns per unit of risk. Pantheon Resources Plc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Pantheon Resources Plc on September 19, 2024 and sell it today you would earn a total of  14.00  from holding Pantheon Resources Plc or generate 66.67% return on investment over 90 days.

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

Valeura Energy  vs.  Pantheon Resources Plc

Valeura Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pantheon Resources Plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pantheon Resources Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Pantheon Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valeura Energy and Pantheon Resources

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

The idea behind Valeura Energy and Pantheon Resources Plc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.