Correlation Between Woodside Energy and PetroShale

Can any of the company-specific risk be diversified away by investing in both Woodside Energy and PetroShale 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 PetroShale 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 PetroShale, you can compare the effects of market volatilities on Woodside Energy and PetroShale 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 PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodside Energy and PetroShale.

Diversification Opportunities for Woodside Energy and PetroShale

-0.07

Correlation Coefficient

Woodside Energy  PetroShale

Good diversification

The 3 months correlation between Woodside and PetroShale is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale 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 PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Woodside Energy i.e., Woodside Energy and PetroShale go up and down completely randomly.

Pair Corralation between Woodside Energy and PetroShale

Considering the 90-day investment horizon Woodside Energy Group is expected to under-perform the PetroShale. But the stock apears to be less risky and, when comparing its historical volatility, Woodside Energy Group is 1.46 times less risky than PetroShale. The stock trades about -0.02 of its potential returns per unit of risk. The PetroShale is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  30.00  in PetroShale on December 4, 2024 and sell it today you would earn a total of  0.00  from holding PetroShale or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Woodside Energy Group  vs.  PetroShale

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.

PetroShale

Risk-Adjusted Performance

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, PetroShale is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Woodside Energy and PetroShale

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

The idea behind Woodside Energy Group and PetroShale 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.