Correlation Between Spindletop and Stamper Oil

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

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

Diversification Opportunities for Spindletop and Stamper Oil

0.27

Correlation Coefficient

Spindletop  Stamper Oil

Modest diversification

The 3 months correlation between Spindletop and Stamper is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Spindletop OG and Stamper Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stamper Oil Gas and Spindletop 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 Spindletop OG are associated (or correlated) with Stamper Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stamper Oil Gas has no effect on the direction of Spindletop i.e., Spindletop and Stamper Oil go up and down completely randomly.

Pair Corralation between Spindletop and Stamper Oil

Given the investment horizon of 90 days Spindletop OG is expected to under-perform the Stamper Oil. But the pink sheet apears to be less risky and, when comparing its historical volatility, Spindletop OG is 12.93 times less risky than Stamper Oil. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Stamper Oil Gas is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Stamper Oil Gas on September 23, 2024 and sell it today you would lose (22.00) from holding Stamper Oil Gas or give up 95.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Spindletop OG  vs.  Stamper Oil Gas

Spindletop OG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spindletop OG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Stamper Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Spindletop and Stamper Oil

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

The idea behind Spindletop OG and Stamper Oil Gas 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.