Correlation Between Epsilon Energy and Kosmos Energy
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and Kosmos 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 Epsilon Energy and Kosmos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epsilon Energy and Kosmos Energy, you can compare the effects of market volatilities on Epsilon Energy and Kosmos 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 Epsilon Energy with a short position of Kosmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and Kosmos Energy.
Diversification Opportunities for Epsilon Energy and Kosmos Energy
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Epsilon and Kosmos is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Kosmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosmos Energy and Epsilon Energy 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 Epsilon Energy are associated (or correlated) with Kosmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosmos Energy has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and Kosmos Energy go up and down completely randomly.
Pair Corralation between Epsilon Energy and Kosmos Energy
Given the investment horizon of 90 days Epsilon Energy is expected to under-perform the Kosmos Energy. But the stock apears to be less risky and, when comparing its historical volatility, Epsilon Energy is 1.24 times less risky than Kosmos Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Kosmos Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 398.00 in Kosmos Energy on August 29, 2024 and sell it today you would lose (8.00) from holding Kosmos Energy or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Epsilon Energy vs. Kosmos Energy
Performance |
| Timeline |
| Epsilon Energy |
| Kosmos Energy |
Epsilon Energy and Kosmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and Kosmos Energy
The main advantage of trading using opposite Epsilon Energy and Kosmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, Kosmos 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 Kosmos Energy will offset losses from the drop in Kosmos Energy's long position.| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
| Kosmos Energy vs. Matador Resources | Kosmos Energy vs. Murphy Oil | Kosmos Energy vs. Civitas Resources | Kosmos Energy vs. Magnolia Oil Gas |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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