Correlation Between EOG Resources and PetroShale
Can any of the company-specific risk be diversified away by investing in both EOG Resources and PetroShale 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 PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and PetroShale, you can compare the effects of market volatilities on EOG Resources and PetroShale 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 PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and PetroShale.
Diversification Opportunities for EOG Resources and PetroShale
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EOG and PetroShale is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale 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 PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of EOG Resources i.e., EOG Resources and PetroShale go up and down completely randomly.
Pair Corralation between EOG Resources and PetroShale
Considering the 90-day investment horizon EOG Resources is expected to generate 1.28 times more return on investment than PetroShale. However, EOG Resources is 1.28 times more volatile than PetroShale. It trades about 0.23 of its potential returns per unit of risk. PetroShale is currently generating about -0.21 per unit of risk. If you would invest 12,196 in EOG Resources on September 1, 2024 and sell it today you would earn a total of 1,130 from holding EOG Resources or generate 9.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EOG Resources vs. PetroShale
Performance |
| Timeline |
| EOG Resources |
| PetroShale |
EOG Resources and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOG Resources and PetroShale
The main advantage of trading using opposite EOG Resources and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources position performs unexpectedly, PetroShale 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 PetroShale will offset losses from the drop in PetroShale's long position.| EOG Resources vs. Epsilon Energy | EOG Resources vs. Crescent Energy Co | EOG Resources vs. Evolution Petroleum | EOG Resources vs. XXL Energy Corp |
| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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