Correlation Between Sky Petroleum and Continental Energy

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

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

Diversification Opportunities for Sky Petroleum and Continental Energy

0.0

Correlation Coefficient

Sky Petroleum  Continental Energy

Pay attention - limited upside

The 3 months correlation between Sky and Continental is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sky Petroleum and Continental Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Energy and Sky 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 Sky Petroleum are associated (or correlated) with Continental Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Energy has no effect on the direction of Sky Petroleum i.e., Sky Petroleum and Continental Energy go up and down completely randomly.

Pair Corralation between Sky Petroleum and Continental Energy

If you would invest  7.00  in Sky Petroleum on September 25, 2024 and sell it today you would lose (6.98) from holding Sky Petroleum or give up 99.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Sky Petroleum  vs.  Continental Energy

Sky Petroleum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Petroleum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Sky Petroleum demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Continental Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Continental Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sky Petroleum and Continental Energy

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

The idea behind Sky Petroleum and Continental 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.