Correlation Between MMEX Resources and PetroShale

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

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

Diversification Opportunities for MMEX Resources and PetroShale

0.06

Correlation Coefficient

MMEX Resources  PetroShale

Significant diversification

The 3 months correlation between MMEX and PetroShale is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MMEX Resources Corp and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and MMEX Resources 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 MMEX Resources Corp are associated (or correlated) with PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of MMEX Resources i.e., MMEX Resources and PetroShale go up and down completely randomly.

Pair Corralation between MMEX Resources and PetroShale

Given the investment horizon of 90 days MMEX Resources Corp is expected to generate 108.54 times more return on investment than PetroShale. However, MMEX Resources is 108.54 times more volatile than PetroShale. It trades about 0.26 of its potential returns per unit of risk. PetroShale is currently generating about -0.02 per unit of risk. If you would invest  0.02  in MMEX Resources Corp on December 29, 2024 and sell it today you would lose (0.01) from holding MMEX Resources Corp or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

MMEX Resources Corp  vs.  PetroShale

MMEX Resources Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MMEX Resources Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, MMEX Resources showed solid returns over the last few months and may actually be approaching a breakup point.

PetroShale

Risk-Adjusted Performance

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, PetroShale is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MMEX Resources and PetroShale

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

The idea behind MMEX Resources Corp and PetroShale 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.