Correlation Between Tullow Oil and PrimeEnergy

Can any of the company-specific risk be diversified away by investing in both Tullow Oil and PrimeEnergy 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 PrimeEnergy 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 PrimeEnergy, you can compare the effects of market volatilities on Tullow Oil and PrimeEnergy 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 PrimeEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tullow Oil and PrimeEnergy.

Diversification Opportunities for Tullow Oil and PrimeEnergy

0.01

Correlation Coefficient

Tullow Oil  PrimeEnergy

Significant diversification

The 3 months correlation between Tullow and PrimeEnergy is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tullow Oil PLC and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy 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 PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of Tullow Oil i.e., Tullow Oil and PrimeEnergy go up and down completely randomly.

Pair Corralation between Tullow Oil and PrimeEnergy

Assuming the 90 days horizon Tullow Oil PLC is expected to generate 1.62 times more return on investment than PrimeEnergy. However, Tullow Oil is 1.62 times more volatile than PrimeEnergy. It trades about 0.02 of its potential returns per unit of risk. PrimeEnergy is currently generating about -0.01 per unit of risk. If you would invest  13.00  in Tullow Oil PLC on December 4, 2024 and sell it today you would lose (1.00) from holding Tullow Oil PLC or give up 7.69% of portfolio value over 90 days.

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

Tullow Oil PLC  vs.  PrimeEnergy

Tullow Oil PLC

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tullow Oil PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tullow Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PrimeEnergy

Risk-Adjusted Performance

Very Weak

Over the last 90 days PrimeEnergy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PrimeEnergy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tullow Oil and PrimeEnergy

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

The idea behind Tullow Oil PLC and PrimeEnergy 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.