Correlation Between Melbana Energy and ShaMaran Petroleum

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

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

Diversification Opportunities for Melbana Energy and ShaMaran Petroleum

-0.54

Correlation Coefficient

Melbana Energy  ShaMaran Petroleum

Excellent diversification

The 3 months correlation between Melbana and ShaMaran is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Melbana Energy Limited 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 Melbana 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 Melbana Energy Limited 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 Melbana Energy i.e., Melbana Energy and ShaMaran Petroleum go up and down completely randomly.

Pair Corralation between Melbana Energy and ShaMaran Petroleum

Assuming the 90 days horizon Melbana Energy Limited is expected to under-perform the ShaMaran Petroleum. In addition to that, Melbana Energy is 1.71 times more volatile than ShaMaran Petroleum Corp. It trades about -0.17 of its total potential returns per unit of risk. ShaMaran Petroleum Corp is currently generating about 0.16 per unit of volatility. If you would invest  5.00  in ShaMaran Petroleum Corp on October 23, 2024 and sell it today you would earn a total of  3.50  from holding ShaMaran Petroleum Corp or generate 70.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Melbana Energy Limited  vs.  ShaMaran Petroleum Corp

Melbana Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melbana Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ShaMaran Petroleum Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ShaMaran Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melbana Energy and ShaMaran Petroleum

The main advantage of trading using opposite Melbana Energy and ShaMaran Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melbana Energy 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 Melbana Energy Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.