Correlation Between PetroShale and Trophy Resources

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

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

Diversification Opportunities for PetroShale and Trophy Resources

-0.03

Correlation Coefficient

PetroShale  Trophy Resources

Good diversification

The 3 months correlation between PetroShale and Trophy is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Trophy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trophy Resources 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 Trophy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trophy Resources has no effect on the direction of PetroShale i.e., PetroShale and Trophy Resources go up and down completely randomly.

Pair Corralation between PetroShale and Trophy Resources

If you would invest  0.19  in Trophy Resources on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Trophy Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

PetroShale  vs.  Trophy Resources

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.

Trophy Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trophy Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Trophy Resources 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 Trophy Resources

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

The idea behind PetroShale and Trophy Resources 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.