Correlation Between Invictus Energy and Reserve Petroleum

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

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

Diversification Opportunities for Invictus Energy and Reserve Petroleum

0.43

Correlation Coefficient

Invictus Energy  Reserve Petroleum

Very weak diversification

The 3 months correlation between Invictus and Reserve is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Invictus Energy Limited and The Reserve Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reserve Petroleum and Invictus 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 Invictus Energy Limited are associated (or correlated) with Reserve Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reserve Petroleum has no effect on the direction of Invictus Energy i.e., Invictus Energy and Reserve Petroleum go up and down completely randomly.

Pair Corralation between Invictus Energy and Reserve Petroleum

Assuming the 90 days horizon Invictus Energy Limited is expected to generate 4.21 times more return on investment than Reserve Petroleum. However, Invictus Energy is 4.21 times more volatile than The Reserve Petroleum. It trades about 0.14 of its potential returns per unit of risk. The Reserve Petroleum is currently generating about 0.03 per unit of risk. If you would invest  4.11  in Invictus Energy Limited on September 27, 2024 and sell it today you would earn a total of  0.89  from holding Invictus Energy Limited or generate 21.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Invictus Energy Limited  vs.  The Reserve Petroleum

Invictus Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invictus Energy Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Invictus Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Reserve Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Reserve Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Reserve Petroleum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invictus Energy and Reserve Petroleum

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

The idea behind Invictus Energy Limited and The Reserve 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.