Correlation Between EOG Resources and PDC Energy
Can any of the company-specific risk be diversified away by investing in both EOG Resources and PDC 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 EOG Resources and PDC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and PDC Energy, you can compare the effects of market volatilities on EOG Resources and PDC 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 EOG Resources with a short position of PDC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and PDC Energy.
Diversification Opportunities for EOG Resources and PDC Energy
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EOG and PDC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and PDC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDC Energy and EOG 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 EOG Resources are associated (or correlated) with PDC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDC Energy has no effect on the direction of EOG Resources i.e., EOG Resources and PDC Energy go up and down completely randomly.
Pair Corralation between EOG Resources and PDC Energy
Considering the 90-day investment horizon EOG Resources is expected to generate 5.02 times less return on investment than PDC Energy. But when comparing it to its historical volatility, EOG Resources is 1.44 times less risky than PDC Energy. It trades about 0.02 of its potential returns per unit of risk. PDC Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,040 in PDC Energy on August 28, 2024 and sell it today you would earn a total of 1,461 from holding PDC Energy or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 28.78% |
| Values | Daily Returns |
EOG Resources vs. PDC Energy
Performance |
| Timeline |
| EOG Resources |
| PDC Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
EOG Resources and PDC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOG Resources and PDC Energy
The main advantage of trading using opposite EOG Resources and PDC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources position performs unexpectedly, PDC 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 PDC Energy will offset losses from the drop in PDC Energy's long position.| EOG Resources vs. Permian Resources | EOG Resources vs. Devon Energy | EOG Resources vs. Coterra Energy | EOG Resources vs. Marathon Oil |
| PDC Energy vs. Devon Energy | PDC Energy vs. Coterra Energy | PDC Energy vs. Diamondback Energy | PDC Energy vs. EOG 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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