Correlation Between Orca Energy and Source Rock

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

By analyzing existing cross correlation between Orca Energy Group and Source Rock Royalties, you can compare the effects of market volatilities on Orca Energy and Source Rock 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 Orca Energy with a short position of Source Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orca Energy and Source Rock.

Diversification Opportunities for Orca Energy and Source Rock

0.14

Correlation Coefficient

Orca Energy  Source Rock

Average diversification

The 3 months correlation between Orca and Source is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Orca Energy Group and Source Rock Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Rock Royalties and Orca 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 Orca Energy Group are associated (or correlated) with Source Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Rock Royalties has no effect on the direction of Orca Energy i.e., Orca Energy and Source Rock go up and down completely randomly.

Pair Corralation between Orca Energy and Source Rock

Assuming the 90 days trading horizon Orca Energy Group is expected to generate 2.47 times more return on investment than Source Rock. However, Orca Energy is 2.47 times more volatile than Source Rock Royalties. It trades about 0.16 of its potential returns per unit of risk. Source Rock Royalties is currently generating about 0.11 per unit of risk. If you would invest  294.00  in Orca Energy Group on October 20, 2024 and sell it today you would earn a total of  26.00  from holding Orca Energy Group or generate 8.84% return on investment over 90 days.

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

Orca Energy Group  vs.  Source Rock Royalties

Orca Energy Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orca Energy Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Orca Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Source Rock Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Orca Energy and Source Rock

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

The idea behind Orca Energy Group and Source Rock Royalties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.