Correlation Between QTC Energy and Sea Oil

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

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

Diversification Opportunities for QTC Energy and Sea Oil

0.27

Correlation Coefficient

QTC Energy  Sea Oil

Modest diversification

The 3 months correlation between QTC and Sea is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding QTC Energy Public and Sea Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Oil Public and QTC Energy 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 QTC Energy Public are associated (or correlated) with Sea Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Oil Public has no effect on the direction of QTC Energy i.e., QTC Energy and Sea Oil go up and down completely randomly.

Pair Corralation between QTC Energy and Sea Oil

Assuming the 90 days trading horizon QTC Energy Public is expected to generate 1.0 times more return on investment than Sea Oil. However, QTC Energy Public is 1.0 times less risky than Sea Oil. It trades about 0.4 of its potential returns per unit of risk. Sea Oil Public is currently generating about 0.09 per unit of risk. If you would invest  340.00  in QTC Energy Public on December 2, 2024 and sell it today you would earn a total of  52.00  from holding QTC Energy Public or generate 15.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

QTC Energy Public  vs.  Sea Oil Public

QTC Energy Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in QTC Energy Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, QTC Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sea Oil Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Oil Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sea Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with QTC Energy and Sea Oil

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

The idea behind QTC Energy Public and Sea Oil Public 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.