Correlation Between Valeura Energy and ROKMASTER Resources

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

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

Diversification Opportunities for Valeura Energy and ROKMASTER Resources

0.26

Correlation Coefficient

Valeura Energy  ROKMASTER Resources

Modest diversification

The 3 months correlation between Valeura and ROKMASTER is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and ROKMASTER Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROKMASTER Resources Corp and Valeura Energy 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 Valeura Energy are associated (or correlated) with ROKMASTER Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROKMASTER Resources Corp has no effect on the direction of Valeura Energy i.e., Valeura Energy and ROKMASTER Resources go up and down completely randomly.

Pair Corralation between Valeura Energy and ROKMASTER Resources

Assuming the 90 days trading horizon Valeura Energy is expected to generate 3.47 times less return on investment than ROKMASTER Resources. But when comparing it to its historical volatility, Valeura Energy is 5.64 times less risky than ROKMASTER Resources. It trades about 0.13 of its potential returns per unit of risk. ROKMASTER Resources Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in ROKMASTER Resources Corp on December 28, 2024 and sell it today you would earn a total of  0.00  from holding ROKMASTER Resources Corp or generate 0.0% return on investment over 90 days.

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

Valeura Energy  vs.  ROKMASTER Resources Corp

Valeura Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

ROKMASTER Resources Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ROKMASTER Resources Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ROKMASTER Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valeura Energy and ROKMASTER Resources

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

The idea behind Valeura Energy and ROKMASTER Resources 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.