Correlation Between Petro Viking and International Petroleum

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

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

Diversification Opportunities for Petro Viking and International Petroleum

-0.22

Correlation Coefficient

Petro Viking  International Petroleum

Very good diversification

The 3 months correlation between Petro and International is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Petro Viking Energy and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum and Petro Viking 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 Petro Viking Energy are associated (or correlated) with International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of Petro Viking i.e., Petro Viking and International Petroleum go up and down completely randomly.

Pair Corralation between Petro Viking and International Petroleum

Assuming the 90 days horizon Petro Viking Energy is expected to generate 65.36 times more return on investment than International Petroleum. However, Petro Viking is 65.36 times more volatile than International Petroleum. It trades about 0.17 of its potential returns per unit of risk. International Petroleum is currently generating about -0.13 per unit of risk. If you would invest  0.38  in Petro Viking Energy on September 5, 2024 and sell it today you would earn a total of  0.81  from holding Petro Viking Energy or generate 213.16% return on investment over 90 days.

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

Petro Viking Energy  vs.  International Petroleum

Petro Viking Energy

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Viking Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Petro Viking reported solid returns over the last few months and may actually be approaching a breakup point.

International Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Petro Viking and International Petroleum

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

The idea behind Petro Viking Energy and International 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.