Correlation Between Valeura Energy and Reserve Petroleum

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

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

Diversification Opportunities for Valeura Energy and Reserve Petroleum

0.39

Correlation Coefficient

Valeura Energy  Reserve Petroleum

Weak diversification

The 3 months correlation between Valeura and Reserve is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and The Reserve Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reserve Petroleum 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 Reserve Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reserve Petroleum has no effect on the direction of Valeura Energy i.e., Valeura Energy and Reserve Petroleum go up and down completely randomly.

Pair Corralation between Valeura Energy and Reserve Petroleum

Assuming the 90 days horizon Valeura Energy is expected to generate 1.6 times more return on investment than Reserve Petroleum. However, Valeura Energy is 1.6 times more volatile than The Reserve Petroleum. It trades about 0.12 of its potential returns per unit of risk. The Reserve Petroleum is currently generating about 0.07 per unit of risk. If you would invest  476.00  in Valeura Energy on December 29, 2024 and sell it today you would earn a total of  108.00  from holding Valeura Energy or generate 22.69% 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.  The Reserve Petroleum

Valeura Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Reserve Petroleum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Reserve Petroleum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Reserve Petroleum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Valeura Energy and Reserve Petroleum

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

The idea behind Valeura Energy and The Reserve 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.