Correlation Between Hess and PTT Exploration

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Can any of the company-specific risk be diversified away by investing in both Hess and PTT Exploration 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 Hess and PTT Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and PTT Exploration Production, you can compare the effects of market volatilities on Hess and PTT Exploration 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 Hess with a short position of PTT Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and PTT Exploration.

Diversification Opportunities for Hess and PTT Exploration

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Hess and PTT is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and PTT Exploration Production in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTT Exploration Prod and Hess 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 Hess Corporation are associated (or correlated) with PTT Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTT Exploration Prod has no effect on the direction of Hess i.e., Hess and PTT Exploration go up and down completely randomly.

Pair Corralation between Hess and PTT Exploration

Considering the 90-day investment horizon Hess is expected to generate 3.03 times less return on investment than PTT Exploration. But when comparing it to its historical volatility, Hess Corporation is 8.66 times less risky than PTT Exploration. It trades about 0.21 of its potential returns per unit of risk. PTT Exploration Production is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,100  in PTT Exploration Production on December 29, 2023 and sell it today you would earn a total of  120.00  from holding PTT Exploration Production or generate 5.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Hess Corp.  vs.  PTT Exploration Production

 Performance 
       Timeline  
Hess 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Hess is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
PTT Exploration Prod 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days PTT Exploration Production has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PTT Exploration is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hess and PTT Exploration Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hess and PTT Exploration

The main advantage of trading using opposite Hess and PTT Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, PTT Exploration 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 PTT Exploration will offset losses from the drop in PTT Exploration's long position.
The idea behind Hess Corporation and PTT Exploration Production 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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