Correlation Between Harbour Energy and Strat Petroleum

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

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

Diversification Opportunities for Harbour Energy and Strat Petroleum

0.0

Correlation Coefficient

Harbour Energy  Strat Petroleum

Pay attention - limited upside

The 3 months correlation between Harbour and Strat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Harbour Energy PLC and Strat Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strat Petroleum and Harbour 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 Harbour Energy PLC 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 Harbour Energy i.e., Harbour Energy and Strat Petroleum go up and down completely randomly.

Pair Corralation between Harbour Energy and Strat Petroleum

Assuming the 90 days horizon Harbour Energy is expected to generate 28.0 times less return on investment than Strat Petroleum. But when comparing it to its historical volatility, Harbour Energy PLC is 14.84 times less risky than Strat Petroleum. It trades about 0.02 of its potential returns per unit of risk. Strat Petroleum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Strat Petroleum on October 5, 2024 and sell it today you would lose (0.01) from holding Strat Petroleum or give up 80.0% of portfolio value over 90 days.

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

Harbour Energy PLC  vs.  Strat Petroleum

Harbour Energy PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbour Energy PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Strat Petroleum

Risk-Adjusted Performance

10 of 100

Very Weak

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

Pair Trading with Harbour Energy and Strat Petroleum

The main advantage of trading using opposite Harbour Energy and Strat Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbour Energy 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 Harbour Energy PLC 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.