Correlation Between Ring Energy and Strat Petroleum

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

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

Diversification Opportunities for Ring Energy and Strat Petroleum

-0.14

Correlation Coefficient

Ring Energy  Strat Petroleum

Good diversification

The 3 months correlation between Ring and Strat is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ring Energy and Strat Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strat Petroleum and Ring 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 Ring Energy are associated (or correlated) with Strat Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strat Petroleum has no effect on the direction of Ring Energy i.e., Ring Energy and Strat Petroleum go up and down completely randomly.

Pair Corralation between Ring Energy and Strat Petroleum

Considering the 90-day investment horizon Ring Energy is expected to under-perform the Strat Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Ring Energy is 43.5 times less risky than Strat Petroleum. The stock trades about -0.01 of its potential returns per unit of risk. The Strat Petroleum is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Strat Petroleum on December 26, 2024 and sell it today you would earn a total of  0.00  from holding Strat Petroleum or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ring Energy  vs.  Strat Petroleum

Ring Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Ring Energy is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Strat Petroleum

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strat Petroleum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Strat Petroleum disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ring Energy and Strat Petroleum

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

The idea behind Ring Energy and Strat 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.