Correlation Between Desert Mountain and Permian Resources
Can any of the company-specific risk be diversified away by investing in both Desert Mountain and Permian 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 Desert Mountain and Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desert Mountain Energy and Permian Resources, you can compare the effects of market volatilities on Desert Mountain and Permian 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 Desert Mountain with a short position of Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desert Mountain and Permian Resources.
Diversification Opportunities for Desert Mountain and Permian Resources
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Desert and Permian is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Desert Mountain Energy and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Desert Mountain 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 Desert Mountain Energy are associated (or correlated) with Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Desert Mountain i.e., Desert Mountain and Permian Resources go up and down completely randomly.
Pair Corralation between Desert Mountain and Permian Resources
Assuming the 90 days horizon Desert Mountain Energy is expected to under-perform the Permian Resources. In addition to that, Desert Mountain is 1.97 times more volatile than Permian Resources. It trades about -0.14 of its total potential returns per unit of risk. Permian Resources is currently generating about 0.2 per unit of volatility. If you would invest 1,361 in Permian Resources on August 26, 2024 and sell it today you would earn a total of 260.00 from holding Permian Resources or generate 19.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Desert Mountain Energy vs. Permian Resources
Performance |
| Timeline |
| Desert Mountain Energy |
| Permian Resources |
Desert Mountain and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Desert Mountain and Permian Resources
The main advantage of trading using opposite Desert Mountain and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desert Mountain position performs unexpectedly, Permian 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 Permian Resources will offset losses from the drop in Permian Resources' long position.| Desert Mountain vs. Permian Resources | Desert Mountain vs. Devon Energy | Desert Mountain vs. EOG Resources | Desert Mountain vs. Coterra Energy |
| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources vs. Range Resources 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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