Correlation Between Rockhopper Exploration and Horizon Oil

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

By analyzing existing cross correlation between Rockhopper Exploration plc and Horizon Oil Limited, you can compare the effects of market volatilities on Rockhopper Exploration and Horizon 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 Rockhopper Exploration with a short position of Horizon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockhopper Exploration and Horizon Oil.

Diversification Opportunities for Rockhopper Exploration and Horizon Oil

-0.37

Correlation Coefficient

Rockhopper Exploration  Horizon Oil

Very good diversification

The 3 months correlation between Rockhopper and Horizon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rockhopper Exploration plc and Horizon Oil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Oil Limited and Rockhopper Exploration 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 Rockhopper Exploration plc are associated (or correlated) with Horizon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Oil Limited has no effect on the direction of Rockhopper Exploration i.e., Rockhopper Exploration and Horizon Oil go up and down completely randomly.

Pair Corralation between Rockhopper Exploration and Horizon Oil

Assuming the 90 days horizon Rockhopper Exploration plc is expected to generate 0.97 times more return on investment than Horizon Oil. However, Rockhopper Exploration plc is 1.03 times less risky than Horizon Oil. It trades about 0.06 of its potential returns per unit of risk. Horizon Oil Limited is currently generating about 0.02 per unit of risk. If you would invest  20.00  in Rockhopper Exploration plc on September 3, 2024 and sell it today you would earn a total of  2.00  from holding Rockhopper Exploration plc or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Rockhopper Exploration plc  vs.  Horizon Oil Limited

Rockhopper Exploration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockhopper Exploration plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Rockhopper Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Horizon Oil Limited

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Rockhopper Exploration and Horizon Oil

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

The idea behind Rockhopper Exploration plc and Horizon Oil 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.