Correlation Between Trio Petroleum and Evolution Petroleum

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

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

Diversification Opportunities for Trio Petroleum and Evolution Petroleum

0.74

Correlation Coefficient

Trio Petroleum  Evolution Petroleum

Poor diversification

The 3 months correlation between Trio and Evolution is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Trio Petroleum Corp and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Trio 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 Trio Petroleum Corp are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Trio Petroleum i.e., Trio Petroleum and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Trio Petroleum and Evolution Petroleum

Given the investment horizon of 90 days Trio Petroleum Corp is expected to generate 8.84 times more return on investment than Evolution Petroleum. However, Trio Petroleum is 8.84 times more volatile than Evolution Petroleum. It trades about 0.09 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.03 per unit of risk. If you would invest  104.00  in Trio Petroleum Corp on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Trio Petroleum Corp or generate 33.65% return on investment over 90 days.

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

Trio Petroleum Corp  vs.  Evolution Petroleum

Trio Petroleum Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trio Petroleum Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Trio Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Evolution Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Evolution Petroleum is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Trio Petroleum and Evolution Petroleum

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

The idea behind Trio Petroleum Corp and Evolution 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.