Correlation Between Harbour Energy and Woodside Petroleum

Can any of the company-specific risk be diversified away by investing in both Harbour Energy and Woodside 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 Woodside 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 Woodside Petroleum, you can compare the effects of market volatilities on Harbour Energy and Woodside 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 Woodside Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbour Energy and Woodside Petroleum.

Diversification Opportunities for Harbour Energy and Woodside Petroleum

0.63

Correlation Coefficient

Harbour Energy  Woodside Petroleum

Poor diversification

The 3 months correlation between Harbour and Woodside is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Harbour Energy PLC and Woodside Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside 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 Woodside Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Petroleum has no effect on the direction of Harbour Energy i.e., Harbour Energy and Woodside Petroleum go up and down completely randomly.

Pair Corralation between Harbour Energy and Woodside Petroleum

Assuming the 90 days horizon Harbour Energy PLC is expected to generate 0.53 times more return on investment than Woodside Petroleum. However, Harbour Energy PLC is 1.88 times less risky than Woodside Petroleum. It trades about -0.17 of its potential returns per unit of risk. Woodside Petroleum is currently generating about -0.16 per unit of risk. If you would invest  345.00  in Harbour Energy PLC on September 29, 2024 and sell it today you would lose (36.00) from holding Harbour Energy PLC or give up 10.43% of portfolio value over 90 days.

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

Harbour Energy PLC  vs.  Woodside 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 unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Woodside Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental 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 Harbour Energy and Woodside Petroleum

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

The idea behind Harbour Energy PLC and Woodside 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..