Correlation Between Pancontinental Oil and Eco (Atlantic)

Can any of the company-specific risk be diversified away by investing in both Pancontinental Oil and Eco (Atlantic) 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 Pancontinental Oil and Eco (Atlantic) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pancontinental Oil Gas and Eco Oil Gas, you can compare the effects of market volatilities on Pancontinental Oil and Eco (Atlantic) 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 Pancontinental Oil with a short position of Eco (Atlantic). Check out your portfolio center. Please also check ongoing floating volatility patterns of Pancontinental Oil and Eco (Atlantic).

Diversification Opportunities for Pancontinental Oil and Eco (Atlantic)

0.34

Correlation Coefficient

Pancontinental Oil  Eco (Atlantic)

Weak diversification

The 3 months correlation between Pancontinental and Eco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pancontinental Oil Gas and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco (Atlantic) and Pancontinental Oil 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 Pancontinental Oil Gas are associated (or correlated) with Eco (Atlantic). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco (Atlantic) has no effect on the direction of Pancontinental Oil i.e., Pancontinental Oil and Eco (Atlantic) go up and down completely randomly.

Pair Corralation between Pancontinental Oil and Eco (Atlantic)

Assuming the 90 days horizon Pancontinental Oil Gas is expected to under-perform the Eco (Atlantic). In addition to that, Pancontinental Oil is 1.57 times more volatile than Eco Oil Gas. It trades about -0.03 of its total potential returns per unit of risk. Eco Oil Gas is currently generating about 0.01 per unit of volatility. If you would invest  13.00  in Eco Oil Gas on December 30, 2024 and sell it today you would lose (2.00) from holding Eco Oil Gas or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Pancontinental Oil Gas  vs.  Eco Oil Gas

Pancontinental Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pancontinental Oil Gas 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Eco (Atlantic)

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Pancontinental Oil and Eco (Atlantic)

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

The idea behind Pancontinental Oil Gas and Eco Oil Gas 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.