Correlation Between Valeura Energy and Santos

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

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

Diversification Opportunities for Valeura Energy and Santos

-0.79

Correlation Coefficient

Valeura Energy  Santos

Pay attention - limited upside

The 3 months correlation between Valeura and Santos is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Valeura Energy i.e., Valeura Energy and Santos go up and down completely randomly.

Pair Corralation between Valeura Energy and Santos

Assuming the 90 days horizon Valeura Energy is expected to generate 1.14 times more return on investment than Santos. However, Valeura Energy is 1.14 times more volatile than Santos. It trades about 0.15 of its potential returns per unit of risk. Santos is currently generating about -0.04 per unit of risk. If you would invest  331.00  in Valeura Energy on September 17, 2024 and sell it today you would earn a total of  134.00  from holding Valeura Energy or generate 40.48% return on investment over 90 days.

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

Valeura Energy  vs.  Santos

Valeura Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 12 (%) 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.

Santos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Valeura Energy and Santos

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

The idea behind Valeura Energy and Santos 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.