Correlation Between PetroShale and Harbour Energy

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

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

Diversification Opportunities for PetroShale and Harbour Energy

0.66

Correlation Coefficient

PetroShale  Harbour Energy

Poor diversification

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

Pair Corralation between PetroShale and Harbour Energy

Assuming the 90 days horizon PetroShale is expected to under-perform the Harbour Energy. In addition to that, PetroShale is 1.18 times more volatile than Harbour Energy plc. It trades about -0.04 of its total potential returns per unit of risk. Harbour Energy plc is currently generating about 0.01 per unit of volatility. If you would invest  331.00  in Harbour Energy plc on September 30, 2024 and sell it today you would lose (1.00) from holding Harbour Energy plc or give up 0.3% of portfolio value over 90 days.

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

PetroShale  vs.  Harbour Energy plc

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 fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Harbour Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbour Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Pair Trading with PetroShale and Harbour Energy

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

The idea behind PetroShale and Harbour Energy plc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.