Correlation Between ShaMaran Petroleum and Horizon Oil

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

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

Diversification Opportunities for ShaMaran Petroleum and Horizon Oil

0.06

Correlation Coefficient

ShaMaran Petroleum  Horizon Oil

Significant diversification

The 3 months correlation between ShaMaran and Horizon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ShaMaran Petroleum Corp 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 ShaMaran Petroleum 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 ShaMaran Petroleum Corp 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 ShaMaran Petroleum i.e., ShaMaran Petroleum and Horizon Oil go up and down completely randomly.

Pair Corralation between ShaMaran Petroleum and Horizon Oil

Assuming the 90 days horizon ShaMaran Petroleum Corp is expected to generate 0.71 times more return on investment than Horizon Oil. However, ShaMaran Petroleum Corp is 1.42 times less risky than Horizon Oil. It trades about 0.21 of its potential returns per unit of risk. Horizon Oil Limited is currently generating about 0.12 per unit of risk. If you would invest  8.00  in ShaMaran Petroleum Corp on December 30, 2024 and sell it today you would earn a total of  8.00  from holding ShaMaran Petroleum Corp or generate 100.0% return on investment over 90 days.

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

ShaMaran Petroleum Corp  vs.  Horizon Oil Limited

ShaMaran Petroleum Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ShaMaran Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Horizon Oil Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Oil Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Horizon Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ShaMaran Petroleum and Horizon Oil

The main advantage of trading using opposite ShaMaran Petroleum and Horizon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ShaMaran Petroleum 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 ShaMaran Petroleum Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.