Correlation Between Cross Timbers and US Energy
Can any of the company-specific risk be diversified away by investing in both Cross Timbers and US 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 Cross Timbers and US Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cross Timbers Royalty and US Energy Corp, you can compare the effects of market volatilities on Cross Timbers and US 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 Cross Timbers with a short position of US Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cross Timbers and US Energy.
Diversification Opportunities for Cross Timbers and US Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cross and USEG is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty and US Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Energy Corp and Cross Timbers 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 Cross Timbers Royalty are associated (or correlated) with US Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Energy Corp has no effect on the direction of Cross Timbers i.e., Cross Timbers and US Energy go up and down completely randomly.
Pair Corralation between Cross Timbers and US Energy
Considering the 90-day investment horizon Cross Timbers Royalty is expected to under-perform the US Energy. But the stock apears to be less risky and, when comparing its historical volatility, Cross Timbers Royalty is 1.63 times less risky than US Energy. The stock trades about -0.04 of its potential returns per unit of risk. The US Energy Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 107.00 in US Energy Corp on September 1, 2024 and sell it today you would earn a total of 78.00 from holding US Energy Corp or generate 72.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cross Timbers Royalty vs. US Energy Corp
Performance |
| Timeline |
| Cross Timbers Royalty |
| US Energy Corp |
Cross Timbers and US Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cross Timbers and US Energy
The main advantage of trading using opposite Cross Timbers and US Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cross Timbers position performs unexpectedly, US 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 US Energy will offset losses from the drop in US Energy's long position.| Cross Timbers vs. Sabine Royalty Trust | Cross Timbers vs. Mesa Royalty Trust | Cross Timbers vs. San Juan Basin | Cross Timbers vs. Permian Basin Royalty |
| US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum Corp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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