Correlation Between International Petroleum and Petro Viking

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

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

Diversification Opportunities for International Petroleum and Petro Viking

-0.26

Correlation Coefficient

International Petroleum  Petro Viking

Very good diversification

The 3 months correlation between International and Petro is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum and Petro Viking Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Viking Energy and International Petroleum 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 International Petroleum are associated (or correlated) with Petro Viking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Viking Energy has no effect on the direction of International Petroleum i.e., International Petroleum and Petro Viking go up and down completely randomly.

Pair Corralation between International Petroleum and Petro Viking

Assuming the 90 days horizon International Petroleum is expected to under-perform the Petro Viking. But the pink sheet apears to be less risky and, when comparing its historical volatility, International Petroleum is 69.18 times less risky than Petro Viking. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Petro Viking Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.38  in Petro Viking Energy on September 13, 2024 and sell it today you would earn a total of  0.81  from holding Petro Viking Energy or generate 213.16% return on investment over 90 days.

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

International Petroleum  vs.  Petro Viking Energy

International Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Petro Viking Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Viking Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Petro Viking reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Petroleum and Petro Viking

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

The idea behind International Petroleum and Petro Viking Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.