Correlation Between Deep Yellow and Peninsula Energy

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

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

Diversification Opportunities for Deep Yellow and Peninsula Energy

-0.11

Correlation Coefficient

Deep Yellow  Peninsula Energy

Good diversification

The 3 months correlation between Deep and Peninsula is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Deep Yellow and Peninsula Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy and Deep Yellow 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 Deep Yellow are associated (or correlated) with Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Deep Yellow i.e., Deep Yellow and Peninsula Energy go up and down completely randomly.

Pair Corralation between Deep Yellow and Peninsula Energy

Assuming the 90 days horizon Deep Yellow is expected to generate 11.01 times less return on investment than Peninsula Energy. But when comparing it to its historical volatility, Deep Yellow is 11.08 times less risky than Peninsula Energy. It trades about 0.05 of its potential returns per unit of risk. Peninsula Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Peninsula Energy on October 25, 2024 and sell it today you would earn a total of  89.00  from holding Peninsula Energy or generate 890.0% return on investment over 90 days.

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

Deep Yellow  vs.  Peninsula Energy

Deep Yellow

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deep Yellow has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Deep Yellow is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Peninsula Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Peninsula Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deep Yellow and Peninsula Energy

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

The idea behind Deep Yellow and Peninsula 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.