Correlation Between Petrofac and Worley

Can any of the company-specific risk be diversified away by investing in both Petrofac and Worley 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 Worley 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 Worley Limited, you can compare the effects of market volatilities on Petrofac and Worley 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 Worley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrofac and Worley.

Diversification Opportunities for Petrofac and Worley

-0.66

Correlation Coefficient

Petrofac  Worley

Excellent diversification

The 3 months correlation between Petrofac and Worley is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Petrofac Ltd ADR and Worley Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worley Limited 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 Worley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worley Limited has no effect on the direction of Petrofac i.e., Petrofac and Worley go up and down completely randomly.

Pair Corralation between Petrofac and Worley

Assuming the 90 days horizon Petrofac Ltd ADR is expected to under-perform the Worley. In addition to that, Petrofac is 8.33 times more volatile than Worley Limited. It trades about 0.0 of its total potential returns per unit of risk. Worley Limited is currently generating about 0.1 per unit of volatility. If you would invest  871.00  in Worley Limited on December 29, 2024 and sell it today you would earn a total of  70.00  from holding Worley Limited or generate 8.04% return on investment over 90 days.

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

Petrofac Ltd ADR  vs.  Worley Limited

Petrofac ADR

Risk-Adjusted Performance

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 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.

Worley Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Worley Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Worley may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Petrofac and Worley

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

The idea behind Petrofac Ltd ADR and Worley Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.