Correlation Between PrimeEnergy and Tullow Oil

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

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

Diversification Opportunities for PrimeEnergy and Tullow Oil

0.18

Correlation Coefficient

PrimeEnergy  Tullow Oil

Average diversification

The 3 months correlation between PrimeEnergy and Tullow is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and Tullow Oil plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tullow Oil plc and PrimeEnergy 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 PrimeEnergy are associated (or correlated) with Tullow Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tullow Oil plc has no effect on the direction of PrimeEnergy i.e., PrimeEnergy and Tullow Oil go up and down completely randomly.

Pair Corralation between PrimeEnergy and Tullow Oil

Given the investment horizon of 90 days PrimeEnergy is expected to generate 0.58 times more return on investment than Tullow Oil. However, PrimeEnergy is 1.72 times less risky than Tullow Oil. It trades about 0.02 of its potential returns per unit of risk. Tullow Oil plc is currently generating about -0.03 per unit of risk. If you would invest  19,800  in PrimeEnergy on December 2, 2024 and sell it today you would lose (210.00) from holding PrimeEnergy or give up 1.06% of portfolio value over 90 days.

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

PrimeEnergy  vs.  Tullow Oil plc

PrimeEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PrimeEnergy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Tullow Oil plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tullow Oil plc 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 essential 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.

Pair Trading with PrimeEnergy and Tullow Oil

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

The idea behind PrimeEnergy and Tullow Oil plc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.