Correlation Between Ridley and Odyssey Energy

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

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

Diversification Opportunities for Ridley and Odyssey Energy

0.08

Correlation Coefficient

Ridley  Odyssey Energy

Significant diversification

The 3 months correlation between Ridley and Odyssey is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ridley and Odyssey Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odyssey Energy and Ridley 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 Ridley are associated (or correlated) with Odyssey Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odyssey Energy has no effect on the direction of Ridley i.e., Ridley and Odyssey Energy go up and down completely randomly.

Pair Corralation between Ridley and Odyssey Energy

Assuming the 90 days trading horizon Ridley is expected to under-perform the Odyssey Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ridley is 2.9 times less risky than Odyssey Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Odyssey Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Odyssey Energy on November 29, 2024 and sell it today you would earn a total of  0.10  from holding Odyssey Energy or generate 5.0% return on investment over 90 days.

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

Ridley  vs.  Odyssey Energy

Ridley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ridley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ridley is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Odyssey Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Odyssey Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Odyssey Energy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Ridley and Odyssey Energy

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

The idea behind Ridley and Odyssey Energy 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 Stocks Directory module to find actively traded stocks across global markets.