Correlation Between Prosafe SE and Interoil Exploration

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

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

Diversification Opportunities for Prosafe SE and Interoil Exploration

-0.59

Correlation Coefficient

Prosafe SE  Interoil Exploration

Excellent diversification

The 3 months correlation between Prosafe and Interoil is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prosafe SE and Interoil Exploration and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interoil Exploration and and Prosafe SE 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 Prosafe SE are associated (or correlated) with Interoil Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interoil Exploration and has no effect on the direction of Prosafe SE i.e., Prosafe SE and Interoil Exploration go up and down completely randomly.

Pair Corralation between Prosafe SE and Interoil Exploration

Assuming the 90 days trading horizon Prosafe SE is expected to under-perform the Interoil Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Prosafe SE is 1.21 times less risky than Interoil Exploration. The stock trades about -0.39 of its potential returns per unit of risk. The Interoil Exploration and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Interoil Exploration and on September 5, 2024 and sell it today you would earn a total of  60.00  from holding Interoil Exploration and or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Prosafe SE  vs.  Interoil Exploration and

Prosafe SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosafe SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Interoil Exploration and

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Interoil Exploration and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Interoil Exploration disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosafe SE and Interoil Exploration

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

The idea behind Prosafe SE and Interoil Exploration and 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.