Correlation Between Evolution Petroleum and Parafin Corp
Can any of the company-specific risk be diversified away by investing in both Evolution Petroleum and Parafin Corp 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 Evolution Petroleum and Parafin Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evolution Petroleum and Parafin Corp, you can compare the effects of market volatilities on Evolution Petroleum and Parafin Corp 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 Evolution Petroleum with a short position of Parafin Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Petroleum and Parafin Corp.
Diversification Opportunities for Evolution Petroleum and Parafin Corp
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Evolution and Parafin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum and Parafin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parafin Corp and Evolution Petroleum 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 Evolution Petroleum are associated (or correlated) with Parafin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parafin Corp has no effect on the direction of Evolution Petroleum i.e., Evolution Petroleum and Parafin Corp go up and down completely randomly.
Pair Corralation between Evolution Petroleum and Parafin Corp
Considering the 90-day investment horizon Evolution Petroleum is expected to generate 50.43 times less return on investment than Parafin Corp. But when comparing it to its historical volatility, Evolution Petroleum is 5.7 times less risky than Parafin Corp. It trades about 0.0 of its potential returns per unit of risk. Parafin Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Parafin Corp on September 14, 2024 and sell it today you would lose (0.01) from holding Parafin Corp or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.91% |
| Values | Daily Returns |
Evolution Petroleum vs. Parafin Corp
Performance |
| Timeline |
| Evolution Petroleum |
| Parafin Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Evolution Petroleum and Parafin Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evolution Petroleum and Parafin Corp
The main advantage of trading using opposite Evolution Petroleum and Parafin Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Petroleum position performs unexpectedly, Parafin Corp 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 Parafin Corp will offset losses from the drop in Parafin Corp's long position.| Evolution Petroleum vs. GeoPark | Evolution Petroleum vs. Granite Ridge Resources | Evolution Petroleum vs. PHX Minerals | Evolution Petroleum vs. California Resources Corp |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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