Correlation Between Valeura Energy and Spindletop

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

By analyzing existing cross correlation between Valeura Energy and Spindletop OG, you can compare the effects of market volatilities on Valeura Energy and Spindletop 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 Spindletop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valeura Energy and Spindletop.

Diversification Opportunities for Valeura Energy and Spindletop

-0.89

Correlation Coefficient

Valeura Energy  Spindletop

Pay attention - limited upside

The 3 months correlation between Valeura and Spindletop is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Spindletop OG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spindletop OG 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 Spindletop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spindletop OG has no effect on the direction of Valeura Energy i.e., Valeura Energy and Spindletop go up and down completely randomly.

Pair Corralation between Valeura Energy and Spindletop

Assuming the 90 days horizon Valeura Energy is expected to generate 0.56 times more return on investment than Spindletop. However, Valeura Energy is 1.78 times less risky than Spindletop. It trades about 0.17 of its potential returns per unit of risk. Spindletop OG is currently generating about -0.12 per unit of risk. If you would invest  332.00  in Valeura Energy on October 10, 2024 and sell it today you would earn a total of  152.00  from holding Valeura Energy or generate 45.78% return on investment over 90 days.

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

Valeura Energy  vs.  Spindletop OG

Valeura Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Spindletop OG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spindletop OG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Valeura Energy and Spindletop

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

The idea behind Valeura Energy and Spindletop OG 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.