Correlation Between Woodside Energy and Prairie Provident

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

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

Diversification Opportunities for Woodside Energy and Prairie Provident

0.16

Correlation Coefficient

Woodside Energy  Prairie Provident

Average diversification

The 3 months correlation between Woodside and Prairie is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident and Woodside 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 Woodside Energy Group are associated (or correlated) with Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Woodside Energy i.e., Woodside Energy and Prairie Provident go up and down completely randomly.

Pair Corralation between Woodside Energy and Prairie Provident

Considering the 90-day investment horizon Woodside Energy Group is expected to under-perform the Prairie Provident. But the stock apears to be less risky and, when comparing its historical volatility, Woodside Energy Group is 19.94 times less risky than Prairie Provident. The stock trades about -0.02 of its potential returns per unit of risk. The Prairie Provident Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2.13  in Prairie Provident Resources on December 4, 2024 and sell it today you would earn a total of  3.41  from holding Prairie Provident Resources or generate 160.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.53%
Values	Daily Returns

Woodside Energy Group  vs.  Prairie Provident Resources

Woodside Energy Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woodside Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Woodside Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Prairie Provident

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prairie Provident reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woodside Energy and Prairie Provident

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

The idea behind Woodside Energy Group and Prairie Provident Resources 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.