Correlation Between Sound Energy and ShaMaran Petroleum

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

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

Diversification Opportunities for Sound Energy and ShaMaran Petroleum

0.06

Correlation Coefficient

Sound Energy  ShaMaran Petroleum

Significant diversification

The 3 months correlation between Sound and ShaMaran is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sound Energy plc and ShaMaran Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ShaMaran Petroleum Corp and Sound 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 Sound Energy plc are associated (or correlated) with ShaMaran Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ShaMaran Petroleum Corp has no effect on the direction of Sound Energy i.e., Sound Energy and ShaMaran Petroleum go up and down completely randomly.

Pair Corralation between Sound Energy and ShaMaran Petroleum

Assuming the 90 days horizon Sound Energy plc is expected to under-perform the ShaMaran Petroleum. In addition to that, Sound Energy is 1.63 times more volatile than ShaMaran Petroleum Corp. It trades about -0.12 of its total potential returns per unit of risk. ShaMaran Petroleum Corp is currently generating about 0.14 per unit of volatility. If you would invest  6.00  in ShaMaran Petroleum Corp on September 3, 2024 and sell it today you would earn a total of  3.00  from holding ShaMaran Petroleum Corp or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Sound Energy plc  vs.  ShaMaran Petroleum Corp

Sound Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sound Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ShaMaran Petroleum Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 10 (%) 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.

Pair Trading with Sound Energy and ShaMaran Petroleum

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

The idea behind Sound Energy plc and ShaMaran Petroleum Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.