Correlation Between Tullow Oil and PEDEVCO Corp

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

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

Diversification Opportunities for Tullow Oil and PEDEVCO Corp

0.45

Correlation Coefficient

Tullow Oil  PEDEVCO Corp

Very weak diversification

The 3 months correlation between Tullow and PEDEVCO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Tullow Oil PLC and PEDEVCO Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEDEVCO Corp and Tullow Oil 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 Tullow Oil PLC are associated (or correlated) with PEDEVCO Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEDEVCO Corp has no effect on the direction of Tullow Oil i.e., Tullow Oil and PEDEVCO Corp go up and down completely randomly.

Pair Corralation between Tullow Oil and PEDEVCO Corp

Assuming the 90 days horizon Tullow Oil PLC is expected to generate 2.09 times more return on investment than PEDEVCO Corp. However, Tullow Oil is 2.09 times more volatile than PEDEVCO Corp. It trades about 0.0 of its potential returns per unit of risk. PEDEVCO Corp is currently generating about -0.06 per unit of risk. If you would invest  14.00  in Tullow Oil PLC on December 3, 2024 and sell it today you would lose (2.00) from holding Tullow Oil PLC or give up 14.29% of portfolio value over 90 days.

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

Tullow Oil PLC  vs.  PEDEVCO Corp

Tullow Oil PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tullow Oil PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tullow Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PEDEVCO Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PEDEVCO Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Tullow Oil and PEDEVCO Corp

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

The idea behind Tullow Oil PLC and PEDEVCO Corp 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.