Correlation Between Evolution Petroleum and Strat Petroleum

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

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

Diversification Opportunities for Evolution Petroleum and Strat Petroleum

0.0

Correlation Coefficient

Evolution Petroleum  Strat Petroleum

Pay attention - limited upside

The 3 months correlation between Evolution and Strat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum and Strat Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strat Petroleum and Evolution Petroleum 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 Evolution Petroleum are associated (or correlated) with Strat Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strat Petroleum has no effect on the direction of Evolution Petroleum i.e., Evolution Petroleum and Strat Petroleum go up and down completely randomly.

Pair Corralation between Evolution Petroleum and Strat Petroleum

If you would invest  500.00  in Evolution Petroleum on December 28, 2024 and sell it today you would earn a total of  12.00  from holding Evolution Petroleum or generate 2.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Evolution Petroleum  vs.  Strat Petroleum

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. In spite of very healthy basic indicators, Evolution Petroleum is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Strat Petroleum

Risk-Adjusted Performance

OK

Over the last 90 days Strat Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Strat Petroleum is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Evolution Petroleum and Strat Petroleum

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

The idea behind Evolution Petroleum and Strat 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.