Correlation Between Heimstaden and ShaMaran Petroleum

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

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

Diversification Opportunities for Heimstaden and ShaMaran Petroleum

-0.63

Correlation Coefficient

Heimstaden  ShaMaran Petroleum

Excellent diversification

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

Pair Corralation between Heimstaden and ShaMaran Petroleum

Assuming the 90 days trading horizon Heimstaden is expected to generate 6.15 times less return on investment than ShaMaran Petroleum. But when comparing it to its historical volatility, Heimstaden AB Pfd is 1.06 times less risky than ShaMaran Petroleum. It trades about 0.01 of its potential returns per unit of risk. ShaMaran Petroleum Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  69.00  in ShaMaran Petroleum Corp on October 12, 2024 and sell it today you would earn a total of  30.00  from holding ShaMaran Petroleum Corp or generate 43.48% return on investment over 90 days.

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

Heimstaden AB Pfd  vs.  ShaMaran Petroleum Corp

Heimstaden AB Pfd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heimstaden AB Pfd has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

ShaMaran Petroleum Corp

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, ShaMaran Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heimstaden and ShaMaran Petroleum

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

The idea behind Heimstaden AB Pfd and ShaMaran Petroleum 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..