Correlation Between Petrofac and CWC Energy

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

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

Diversification Opportunities for Petrofac and CWC Energy

0.0

Correlation Coefficient

Petrofac  CWC Energy

Pay attention - limited upside

The 3 months correlation between Petrofac and CWC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petrofac Ltd ADR and CWC Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CWC Energy Services and Petrofac 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 Petrofac Ltd ADR are associated (or correlated) with CWC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CWC Energy Services has no effect on the direction of Petrofac i.e., Petrofac and CWC Energy go up and down completely randomly.

Pair Corralation between Petrofac and CWC Energy

If you would invest (100.00) in CWC Energy Services on December 29, 2024 and sell it today you would earn a total of  100.00  from holding CWC Energy Services or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Petrofac Ltd ADR  vs.  CWC Energy Services

Petrofac ADR

Risk-Adjusted Performance

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 fairly strong fundamental indicators, Petrofac is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CWC Energy Services

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Petrofac and CWC Energy

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

The idea behind Petrofac Ltd ADR and CWC Energy Services 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.