Correlation Between Epsilon Energy and Mexco Energy
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and Mexco 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 Mexco 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 Mexco Energy, you can compare the effects of market volatilities on Epsilon Energy and Mexco 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 Mexco Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and Mexco Energy.
Diversification Opportunities for Epsilon Energy and Mexco Energy
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Epsilon and Mexco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Mexco Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mexco 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 Mexco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mexco Energy has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and Mexco Energy go up and down completely randomly.
Pair Corralation between Epsilon Energy and Mexco Energy
Given the investment horizon of 90 days Epsilon Energy is expected to generate 0.94 times more return on investment than Mexco Energy. However, Epsilon Energy is 1.07 times less risky than Mexco Energy. It trades about 0.06 of its potential returns per unit of risk. Mexco Energy is currently generating about -0.02 per unit of risk. If you would invest 561.00 in Epsilon Energy on August 28, 2024 and sell it today you would earn a total of 32.00 from holding Epsilon Energy or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Epsilon Energy vs. Mexco Energy
Performance |
| Timeline |
| Epsilon Energy |
| Mexco Energy |
Epsilon Energy and Mexco Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and Mexco Energy
The main advantage of trading using opposite Epsilon Energy and Mexco Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, Mexco 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 Mexco Energy will offset losses from the drop in Mexco 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 |
| Mexco Energy vs. PHX Minerals | Mexco Energy vs. Granite Ridge Resources | Mexco Energy vs. XXL Energy Corp | Mexco Energy vs. Permianville Royalty Trust |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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