Correlation Between Star Petroleum and Sea Oil

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

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

Diversification Opportunities for Star Petroleum and Sea Oil

0.04

Correlation Coefficient

Star Petroleum  Sea Oil

Significant diversification

The 3 months correlation between Star and Sea is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Star Petroleum Refining and Sea Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Oil Public and Star 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 Star Petroleum Refining are associated (or correlated) with Sea Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Oil Public has no effect on the direction of Star Petroleum i.e., Star Petroleum and Sea Oil go up and down completely randomly.

Pair Corralation between Star Petroleum and Sea Oil

Assuming the 90 days trading horizon Star Petroleum Refining is expected to under-perform the Sea Oil. In addition to that, Star Petroleum is 1.95 times more volatile than Sea Oil Public. It trades about -0.16 of its total potential returns per unit of risk. Sea Oil Public is currently generating about 0.06 per unit of volatility. If you would invest  254.00  in Sea Oil Public on December 1, 2024 and sell it today you would earn a total of  10.00  from holding Sea Oil Public or generate 3.94% return on investment over 90 days.

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

Star Petroleum Refining  vs.  Sea Oil Public

Star Petroleum Refining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Star Petroleum Refining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sea Oil Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Oil Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sea Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Star Petroleum and Sea Oil

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

The idea behind Star Petroleum Refining and Sea Oil Public 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.