Correlation Between Spindletop and Valeura Energy

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

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

Diversification Opportunities for Spindletop and Valeura Energy

-0.85

Correlation Coefficient

Spindletop  Valeura Energy

Pay attention - limited upside

The 3 months correlation between Spindletop and Valeura is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Spindletop OG and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Spindletop i.e., Spindletop and Valeura Energy go up and down completely randomly.

Pair Corralation between Spindletop and Valeura Energy

Given the investment horizon of 90 days Spindletop OG is expected to under-perform the Valeura Energy. In addition to that, Spindletop is 1.71 times more volatile than Valeura Energy. It trades about -0.02 of its total potential returns per unit of risk. Valeura Energy is currently generating about 0.09 per unit of volatility. If you would invest  314.00  in Valeura Energy on September 26, 2024 and sell it today you would earn a total of  132.00  from holding Valeura Energy or generate 42.04% return on investment over 90 days.

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

Spindletop OG  vs.  Valeura Energy

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 abnormal 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.

Valeura Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spindletop and Valeura Energy

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

The idea behind Spindletop OG and Valeura 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.