Correlation Between Petro Viking and Otto Energy

Can any of the company-specific risk be diversified away by investing in both Petro Viking and Otto 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 Petro Viking and Otto Energy 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 Otto Energy Limited, you can compare the effects of market volatilities on Petro Viking and Otto 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 Petro Viking with a short position of Otto Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petro Viking and Otto Energy.

Diversification Opportunities for Petro Viking and Otto Energy

-0.25

Correlation Coefficient

Petro Viking  Otto Energy

Very good diversification

The 3 months correlation between Petro and Otto is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Petro Viking Energy and Otto Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto Energy Limited 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 Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy Limited has no effect on the direction of Petro Viking i.e., Petro Viking and Otto Energy go up and down completely randomly.

Pair Corralation between Petro Viking and Otto Energy

Assuming the 90 days horizon Petro Viking Energy is expected to generate 20.57 times more return on investment than Otto Energy. However, Petro Viking is 20.57 times more volatile than Otto Energy Limited. It trades about 0.18 of its potential returns per unit of risk. Otto Energy Limited is currently generating about 0.21 per unit of risk. If you would invest  0.13  in Petro Viking Energy on December 2, 2024 and sell it today you would earn a total of  0.23  from holding Petro Viking Energy or generate 176.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

Petro Viking Energy  vs.  Otto Energy Limited

Petro Viking Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Viking Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Petro Viking reported solid returns over the last few months and may actually be approaching a breakup point.

Otto Energy Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Otto Energy Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Otto Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petro Viking and Otto Energy

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

The idea behind Petro Viking Energy and Otto Energy Limited 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.