Correlation Between NEL ASA and Evolution Petroleum

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

By analyzing existing cross correlation between NEL ASA ADR30 and Evolution Petroleum, you can compare the effects of market volatilities on NEL ASA and Evolution Petroleum 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 NEL ASA with a short position of Evolution Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEL ASA and Evolution Petroleum.

Diversification Opportunities for NEL ASA and Evolution Petroleum

-0.07

Correlation Coefficient

NEL ASA  Evolution Petroleum

Good diversification

The 3 months correlation between NEL and Evolution is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NEL ASA ADR30 and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and NEL ASA 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 NEL ASA ADR30 are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of NEL ASA i.e., NEL ASA and Evolution Petroleum go up and down completely randomly.

Pair Corralation between NEL ASA and Evolution Petroleum

Assuming the 90 days trading horizon NEL ASA ADR30 is expected to generate 4.44 times more return on investment than Evolution Petroleum. However, NEL ASA is 4.44 times more volatile than Evolution Petroleum. It trades about 0.06 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.03 per unit of risk. If you would invest  705.00  in NEL ASA ADR30 on December 21, 2024 and sell it today you would earn a total of  70.00  from holding NEL ASA ADR30 or generate 9.93% return on investment over 90 days.

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

NEL ASA ADR30  vs.  Evolution Petroleum

NEL ASA ADR30

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEL ASA ADR30 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, NEL ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Evolution Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Evolution Petroleum is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEL ASA and Evolution Petroleum

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

The idea behind NEL ASA ADR30 and Evolution Petroleum 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.