Correlation Between Vaalco Energy and PetroTal Corp

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

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

Diversification Opportunities for Vaalco Energy and PetroTal Corp

0.07

Correlation Coefficient

Vaalco Energy  PetroTal Corp

Significant diversification

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

Pair Corralation between Vaalco Energy and PetroTal Corp

Considering the 90-day investment horizon Vaalco Energy is expected to under-perform the PetroTal Corp. In addition to that, Vaalco Energy is 1.11 times more volatile than PetroTal Corp. It trades about -0.04 of its total potential returns per unit of risk. PetroTal Corp is currently generating about 0.15 per unit of volatility. If you would invest  39.00  in PetroTal Corp on December 29, 2024 and sell it today you would earn a total of  9.00  from holding PetroTal Corp or generate 23.08% return on investment over 90 days.

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

Vaalco Energy  vs.  PetroTal Corp

Vaalco Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vaalco Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

PetroTal Corp

Risk-Adjusted Performance

Good

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

Pair Trading with Vaalco Energy and PetroTal Corp

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

The idea behind Vaalco Energy and PetroTal Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.