Correlation Between Pure Storage and Whiting Petroleum

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

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

Diversification Opportunities for Pure Storage and Whiting Petroleum

-0.8

Correlation Coefficient

Pure Storage  Whiting Petroleum

Pay attention - limited upside

The 3 months correlation between Pure and Whiting is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum and Pure Storage 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 Pure Storage are associated (or correlated) with Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of Pure Storage i.e., Pure Storage and Whiting Petroleum go up and down completely randomly.

Pair Corralation between Pure Storage and Whiting Petroleum

Given the investment horizon of 90 days Pure Storage is expected to generate 0.62 times more return on investment than Whiting Petroleum. However, Pure Storage is 1.6 times less risky than Whiting Petroleum. It trades about 0.07 of its potential returns per unit of risk. Whiting Petroleum is currently generating about 0.03 per unit of risk. If you would invest  2,601  in Pure Storage on October 11, 2024 and sell it today you would earn a total of  3,825  from holding Pure Storage or generate 147.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	82.02%
Values	Daily Returns

Pure Storage  vs.  Whiting Petroleum

Pure Storage

Risk-Adjusted Performance

7 of 100

OK

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

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Whiting Petroleum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pure Storage and Whiting Petroleum

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

The idea behind Pure Storage and Whiting Petroleum 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..