Correlation Between Strat Petroleum and Santa Fe

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

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

Diversification Opportunities for Strat Petroleum and Santa Fe

0.0

Correlation Coefficient

Strat Petroleum  Santa Fe

Pay attention - limited upside

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

Pair Corralation between Strat Petroleum and Santa Fe

Given the investment horizon of 90 days Strat Petroleum is expected to generate 16.74 times more return on investment than Santa Fe. However, Strat Petroleum is 16.74 times more volatile than Santa Fe Petroleum. It trades about 0.04 of its potential returns per unit of risk. Santa Fe Petroleum is currently generating about -0.06 per unit of risk. If you would invest  0.01  in Strat Petroleum on October 5, 2024 and sell it today you would lose (0.01) from holding Strat Petroleum or give up 80.0% of portfolio value over 90 days.

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

Strat Petroleum  vs.  Santa Fe Petroleum

Strat Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strat Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Strat Petroleum is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Santa Fe Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santa Fe Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Santa Fe is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Strat Petroleum and Santa Fe

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

The idea behind Strat Petroleum and Santa Fe Petroleum 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.