Correlation Between Golden Ocean and Interoil Exploration

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

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

Diversification Opportunities for Golden Ocean and Interoil Exploration

0.62

Correlation Coefficient

Golden Ocean  Interoil Exploration

Poor diversification

The 3 months correlation between Golden and Interoil is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and Interoil Exploration and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interoil Exploration and and Golden Ocean 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 Golden Ocean Group are associated (or correlated) with Interoil Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interoil Exploration and has no effect on the direction of Golden Ocean i.e., Golden Ocean and Interoil Exploration go up and down completely randomly.

Pair Corralation between Golden Ocean and Interoil Exploration

Assuming the 90 days trading horizon Golden Ocean Group is expected to generate 0.69 times more return on investment than Interoil Exploration. However, Golden Ocean Group is 1.45 times less risky than Interoil Exploration. It trades about -0.04 of its potential returns per unit of risk. Interoil Exploration and is currently generating about -0.04 per unit of risk. If you would invest  9,790  in Golden Ocean Group on December 30, 2024 and sell it today you would lose (1,042) from holding Golden Ocean Group or give up 10.64% of portfolio value over 90 days.

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

Golden Ocean Group  vs.  Interoil Exploration and

Golden Ocean Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Ocean Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Interoil Exploration and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interoil Exploration and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Golden Ocean and Interoil Exploration

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

The idea behind Golden Ocean Group and Interoil Exploration and 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.