Can any of the company-specific risk be diversified away by investing in both Woodside Energy and Antero 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 Energy and Antero Resources 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 Antero Resources Corp, you can compare the effects of market volatilities on Woodside Energy and Antero 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 Energy with a short position of Antero Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodside Energy and Antero Resources.
Diversification Opportunities for Woodside Energy and Antero Resources
The 3 months correlation between Woodside and Antero is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and Antero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Resources Corp 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 Antero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Resources Corp has no effect on the direction of Woodside Energy i.e., Woodside Energy and Antero Resources go up and down completely randomly.
Pair Corralation between Woodside Energy and Antero Resources
Considering the 90-day investment horizon Woodside Energy Group is expected to generate 0.67 times more return on investment than Antero Resources. However, Woodside Energy Group is 1.5 times less risky than Antero Resources. It trades about -0.09 of its potential returns per unit of risk. Antero Resources Corp is currently generating about -0.24 per unit of risk. If you would invest 2,371 in Woodside Energy Group on June 27, 2023 and sell it today you would lose (59.00) from holding Woodside Energy Group or give up 2.49% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Woodside Energy Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Woodside Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Antero Resources may actually be approaching a critical reversion point that can send shares even higher in October 2023.
Woodside Energy and Antero Resources Volatility Contrast
Predicted Return Density
Pair Trading with Woodside Energy and Antero Resources
The main advantage of trading using opposite Woodside Energy and Antero Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside Energy position performs unexpectedly, Antero 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 Antero Resources will offset losses from the drop in Antero Resources' long position.
The idea behind Woodside Energy Group and Antero Resources Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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