Correlation Between Interoil Exploration and Golden Ocean

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

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

Diversification Opportunities for Interoil Exploration and Golden Ocean

0.62

Correlation Coefficient

Interoil Exploration  Golden Ocean

Poor diversification

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

Pair Corralation between Interoil Exploration and Golden Ocean

Assuming the 90 days trading horizon Interoil Exploration and is expected to under-perform the Golden Ocean. In addition to that, Interoil Exploration is 1.45 times more volatile than Golden Ocean Group. It trades about -0.04 of its total potential returns per unit of risk. Golden Ocean Group is currently generating about -0.04 per unit of volatility. 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

Interoil Exploration and  vs.  Golden Ocean Group

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.

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.

Pair Trading with Interoil Exploration and Golden Ocean

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

The idea behind Interoil Exploration and and Golden Ocean Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.