Correlation Between Pulse Seismic and Petrofac

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

By analyzing existing cross correlation between Pulse Seismic and Petrofac Ltd ADR, you can compare the effects of market volatilities on Pulse Seismic and Petrofac 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 Pulse Seismic with a short position of Petrofac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pulse Seismic and Petrofac.

Diversification Opportunities for Pulse Seismic and Petrofac

0.31

Correlation Coefficient

Pulse Seismic  Petrofac

Weak diversification

The 3 months correlation between Pulse and Petrofac is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pulse Seismic and Petrofac Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrofac ADR and Pulse Seismic 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 Pulse Seismic are associated (or correlated) with Petrofac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrofac ADR has no effect on the direction of Pulse Seismic i.e., Pulse Seismic and Petrofac go up and down completely randomly.

Pair Corralation between Pulse Seismic and Petrofac

Assuming the 90 days horizon Pulse Seismic is expected to generate 21.67 times less return on investment than Petrofac. But when comparing it to its historical volatility, Pulse Seismic is 20.43 times less risky than Petrofac. It trades about 0.05 of its potential returns per unit of risk. Petrofac Ltd ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Petrofac Ltd ADR on October 17, 2024 and sell it today you would lose (13.54) from holding Petrofac Ltd ADR or give up 75.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.19%
Values	Daily Returns

Pulse Seismic  vs.  Petrofac Ltd ADR

Pulse Seismic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Petrofac ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrofac Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pulse Seismic and Petrofac

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

The idea behind Pulse Seismic and Petrofac Ltd ADR 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.