Correlation Between Petrus Resources and Reserve Petroleum

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

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

Diversification Opportunities for Petrus Resources and Reserve Petroleum

0.44

Correlation Coefficient

Petrus Resources  Reserve Petroleum

Very weak diversification

The 3 months correlation between Petrus and Reserve is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petrus Resources and The Reserve Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reserve Petroleum and Petrus Resources 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 Petrus Resources 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 Petrus Resources i.e., Petrus Resources and Reserve Petroleum go up and down completely randomly.

Pair Corralation between Petrus Resources and Reserve Petroleum

Assuming the 90 days horizon Petrus Resources is expected to under-perform the Reserve Petroleum. But the otc stock apears to be less risky and, when comparing its historical volatility, Petrus Resources is 1.44 times less risky than Reserve Petroleum. The otc stock trades about -0.01 of its potential returns per unit of risk. The The Reserve Petroleum is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  22,700  in The Reserve Petroleum on March 12, 2024 and sell it today you would lose (6,200) from holding The Reserve Petroleum or give up 27.31% of portfolio value over 90 days.

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

Petrus Resources  vs.  The Reserve Petroleum

Petrus Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Reserve Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Reserve Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Reserve Petroleum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Petrus Resources and Reserve Petroleum

The main advantage of trading using opposite Petrus Resources and Reserve Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrus Resources 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 Petrus Resources 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.