Correlation Between Tullow Oil and ShaMaran Petroleum

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

Diversification Opportunities for Tullow Oil and ShaMaran Petroleum

-0.83

Correlation Coefficient

Tullow Oil  ShaMaran Petroleum

Pay attention - limited upside

The 3 months correlation between Tullow and ShaMaran is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tullow Oil PLC and ShaMaran Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ShaMaran Petroleum 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 ShaMaran Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ShaMaran Petroleum Corp has no effect on the direction of Tullow Oil i.e., Tullow Oil and ShaMaran Petroleum go up and down completely randomly.

Pair Corralation between Tullow Oil and ShaMaran Petroleum

Assuming the 90 days horizon Tullow Oil PLC is expected to under-perform the ShaMaran Petroleum. In addition to that, Tullow Oil is 1.53 times more volatile than ShaMaran Petroleum Corp. It trades about -0.03 of its total potential returns per unit of risk. ShaMaran Petroleum Corp is currently generating about 0.21 per unit of volatility. If you would invest  8.00  in ShaMaran Petroleum Corp on December 30, 2024 and sell it today you would earn a total of  8.00  from holding ShaMaran Petroleum Corp or generate 100.0% return on investment over 90 days.

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

Tullow Oil PLC  vs.  ShaMaran Petroleum 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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ShaMaran Petroleum Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ShaMaran Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tullow Oil and ShaMaran Petroleum

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

The idea behind Tullow Oil PLC and ShaMaran Petroleum 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.