Correlation Between PetroShale and New Frontier

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

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

Diversification Opportunities for PetroShale and New Frontier

0.0

Correlation Coefficient

PetroShale  New Frontier

Pay attention - limited upside

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

Pair Corralation between PetroShale and New Frontier

Assuming the 90 days horizon PetroShale is expected to generate 0.44 times more return on investment than New Frontier. However, PetroShale is 2.29 times less risky than New Frontier. It trades about -0.01 of its potential returns per unit of risk. New Frontier Energy is currently generating about -0.05 per unit of risk. If you would invest  42.00  in PetroShale on October 11, 2024 and sell it today you would lose (11.00) from holding PetroShale or give up 26.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

PetroShale  vs.  New Frontier Energy

PetroShale

Risk-Adjusted Performance

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Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

New Frontier Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Frontier Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, New Frontier is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with PetroShale and New Frontier

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

The idea behind PetroShale and New Frontier Energy 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 CEOs Directory module to screen CEOs from public companies around the world.