Correlation Between Woodside Petroleum and Pantheon Resources

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

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

Diversification Opportunities for Woodside Petroleum and Pantheon Resources

-0.19

Correlation Coefficient

Woodside Petroleum  Pantheon Resources

Good diversification

The 3 months correlation between Woodside and Pantheon is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Petroleum and Pantheon Resources Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pantheon Resources Plc and Woodside Petroleum 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 Petroleum are associated (or correlated) with Pantheon Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pantheon Resources Plc has no effect on the direction of Woodside Petroleum i.e., Woodside Petroleum and Pantheon Resources go up and down completely randomly.

Pair Corralation between Woodside Petroleum and Pantheon Resources

Assuming the 90 days horizon Woodside Petroleum is expected to generate 845.4 times less return on investment than Pantheon Resources. In addition to that, Woodside Petroleum is 1.19 times more volatile than Pantheon Resources Plc. It trades about 0.0 of its total potential returns per unit of risk. Pantheon Resources Plc is currently generating about 0.23 per unit of volatility. If you would invest  22.00  in Pantheon Resources Plc on October 20, 2024 and sell it today you would earn a total of  22.00  from holding Pantheon Resources Plc or generate 100.0% return on investment over 90 days.

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

Woodside Petroleum  vs.  Pantheon Resources Plc

Woodside Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pantheon Resources Plc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pantheon Resources Plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pantheon Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woodside Petroleum and Pantheon Resources

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

The idea behind Woodside Petroleum and Pantheon Resources Plc 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 Anywhere module to track or share privately all of your investments from the convenience of any device.