Correlation Between PetroShale and Gulfport Energy

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

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

Diversification Opportunities for PetroShale and Gulfport Energy

-0.11

Correlation Coefficient

PetroShale  Gulfport Energy

Good diversification

The 3 months correlation between PetroShale and Gulfport is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating and PetroShale 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 PetroShale are associated (or correlated) with Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of PetroShale i.e., PetroShale and Gulfport Energy go up and down completely randomly.

Pair Corralation between PetroShale and Gulfport Energy

Assuming the 90 days horizon PetroShale is expected to generate 18.67 times less return on investment than Gulfport Energy. In addition to that, PetroShale is 1.01 times more volatile than Gulfport Energy Operating. It trades about 0.01 of its total potential returns per unit of risk. Gulfport Energy Operating is currently generating about 0.21 per unit of volatility. If you would invest  14,286  in Gulfport Energy Operating on October 26, 2024 and sell it today you would earn a total of  4,594  from holding Gulfport Energy Operating or generate 32.16% return on investment over 90 days.

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

PetroShale  vs.  Gulfport Energy Operating

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gulfport Energy Operating

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gulfport Energy Operating are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gulfport Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroShale and Gulfport Energy

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

The idea behind PetroShale and Gulfport Energy Operating 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.