Correlation Between ShaMaran Petroleum and Sound Energy

Can any of the company-specific risk be diversified away by investing in both ShaMaran Petroleum and Sound 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 ShaMaran Petroleum and Sound Energy 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 Sound Energy plc, you can compare the effects of market volatilities on ShaMaran Petroleum and Sound 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 ShaMaran Petroleum with a short position of Sound Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ShaMaran Petroleum and Sound Energy.

Diversification Opportunities for ShaMaran Petroleum and Sound Energy

0.77

Correlation Coefficient

ShaMaran Petroleum  Sound Energy

Poor diversification

The 3 months correlation between ShaMaran and Sound is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ShaMaran Petroleum Corp and Sound Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Energy plc 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 Sound Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Energy plc has no effect on the direction of ShaMaran Petroleum i.e., ShaMaran Petroleum and Sound Energy go up and down completely randomly.

Pair Corralation between ShaMaran Petroleum and Sound Energy

Assuming the 90 days horizon ShaMaran Petroleum is expected to generate 7.02 times less return on investment than Sound Energy. But when comparing it to its historical volatility, ShaMaran Petroleum Corp is 8.03 times less risky than Sound Energy. It trades about 0.17 of its potential returns per unit of risk. Sound Energy plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.41  in Sound Energy plc on December 1, 2024 and sell it today you would earn a total of  4.31  from holding Sound Energy plc or generate 1051.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

ShaMaran Petroleum Corp  vs.  Sound Energy plc

ShaMaran Petroleum Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 13 (%) 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.

Sound Energy plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sound Energy plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Sound Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ShaMaran Petroleum and Sound Energy

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

The idea behind ShaMaran Petroleum Corp and Sound Energy plc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.