Correlation Between Petro Viking and ROK Resources

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

Diversification Opportunities for Petro Viking and ROK Resources

0.28

Correlation Coefficient

Petro Viking  ROK Resources

Modest diversification

The 3 months correlation between Petro and ROK is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petro Viking Energy and ROK Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROK Resources 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 ROK Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROK Resources has no effect on the direction of Petro Viking i.e., Petro Viking and ROK Resources go up and down completely randomly.

Pair Corralation between Petro Viking and ROK Resources

Assuming the 90 days horizon Petro Viking Energy is expected to generate 14.83 times more return on investment than ROK Resources. However, Petro Viking is 14.83 times more volatile than ROK Resources. It trades about 0.14 of its potential returns per unit of risk. ROK Resources is currently generating about 0.02 per unit of risk. If you would invest  0.84  in Petro Viking Energy on December 27, 2024 and sell it today you would lose (0.48) from holding Petro Viking Energy or give up 57.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Petro Viking Energy  vs.  ROK Resources

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 11 (%) 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.

ROK Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ROK Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ROK Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Petro Viking and ROK Resources

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

The idea behind Petro Viking Energy and ROK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.