Correlation Between InPlay Oil and Surge Energy

Can any of the company-specific risk be diversified away by investing in both InPlay Oil and Surge Energy 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 InPlay Oil and Surge Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between InPlay Oil Corp and Surge Energy, you can compare the effects of market volatilities on InPlay Oil and Surge Energy 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 InPlay Oil with a short position of Surge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Surge Energy.

Diversification Opportunities for InPlay Oil and Surge Energy

0.93

Correlation Coefficient

InPlay Oil  Surge Energy

Almost no diversification

The 3 months correlation between InPlay and Surge is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Energy and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of InPlay Oil i.e., InPlay Oil and Surge Energy go up and down completely randomly.

Pair Corralation between InPlay Oil and Surge Energy

Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 0.86 times more return on investment than Surge Energy. However, InPlay Oil Corp is 1.16 times less risky than Surge Energy. It trades about 0.01 of its potential returns per unit of risk. Surge Energy is currently generating about -0.04 per unit of risk. If you would invest  236.00  in InPlay Oil Corp on February 7, 2024 and sell it today you would earn a total of  1.00  from holding InPlay Oil Corp or generate 0.42% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Surge Energy

InPlay Oil Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InPlay Oil Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, InPlay Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Surge Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Surge Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InPlay Oil and Surge Energy

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

The idea behind InPlay Oil Corp and Surge Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.