Correlation Between 88 Energy and Saturn Oil

Can any of the company-specific risk be diversified away by investing in both 88 Energy and Saturn Oil 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 88 Energy and Saturn Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 88 Energy Limited and Saturn Oil Gas, you can compare the effects of market volatilities on 88 Energy and Saturn Oil 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 88 Energy with a short position of Saturn Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of 88 Energy and Saturn Oil.

Diversification Opportunities for 88 Energy and Saturn Oil

0.38

Correlation Coefficient

88 Energy  Saturn Oil

Weak diversification

The 3 months correlation between EEENF and Saturn is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding 88 Energy Limited and Saturn Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saturn Oil Gas and 88 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 88 Energy Limited are associated (or correlated) with Saturn Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saturn Oil Gas has no effect on the direction of 88 Energy i.e., 88 Energy and Saturn Oil go up and down completely randomly.

Pair Corralation between 88 Energy and Saturn Oil

Assuming the 90 days horizon 88 Energy Limited is expected to generate 3.58 times more return on investment than Saturn Oil. However, 88 Energy is 3.58 times more volatile than Saturn Oil Gas. It trades about 0.0 of its potential returns per unit of risk. Saturn Oil Gas is currently generating about -0.14 per unit of risk. If you would invest  0.14  in 88 Energy Limited on September 18, 2024 and sell it today you would lose (0.02) from holding 88 Energy Limited or give up 14.29% of portfolio value over 90 days.

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

88 Energy Limited  vs.  Saturn Oil Gas

88 Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 88 Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, 88 Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Saturn Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saturn Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with 88 Energy and Saturn Oil

The main advantage of trading using opposite 88 Energy and Saturn Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 88 Energy position performs unexpectedly, Saturn Oil 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 Saturn Oil will offset losses from the drop in Saturn Oil's long position.

The idea behind 88 Energy Limited and Saturn Oil Gas 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.