Correlation Between California Resources and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both California Resources and Epsilon 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 California Resources and Epsilon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Resources Corp and Epsilon Energy, you can compare the effects of market volatilities on California Resources and Epsilon 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 California Resources with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Resources and Epsilon Energy.
Diversification Opportunities for California Resources and Epsilon Energy
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Epsilon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and California 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 California Resources Corp are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of California Resources i.e., California Resources and Epsilon Energy go up and down completely randomly.
Pair Corralation between California Resources and Epsilon Energy
Considering the 90-day investment horizon California Resources Corp is expected to generate 0.8 times more return on investment than Epsilon Energy. However, California Resources Corp is 1.25 times less risky than Epsilon Energy. It trades about 0.25 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.01 per unit of risk. If you would invest 5,240 in California Resources Corp on August 28, 2024 and sell it today you would earn a total of 565.00 from holding California Resources Corp or generate 10.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Resources Corp vs. Epsilon Energy
Performance |
| Timeline |
| California Resources Corp |
| Epsilon Energy |
California Resources and Epsilon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Resources and Epsilon Energy
The main advantage of trading using opposite California Resources and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Resources position performs unexpectedly, Epsilon 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.| California Resources vs. Berry Petroleum Corp | California Resources vs. Magnolia Oil Gas | California Resources vs. Comstock Resources | California Resources vs. Gulfport Energy Operating |
| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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