Correlation Between Epsilon Energy and Northern Oil
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and Northern Oil 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 Northern Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epsilon Energy and Northern Oil Gas, you can compare the effects of market volatilities on Epsilon Energy and Northern Oil 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 Northern Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and Northern Oil.
Diversification Opportunities for Epsilon Energy and Northern Oil
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Epsilon and Northern is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Northern Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Oil Gas 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 Northern Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Oil Gas has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and Northern Oil go up and down completely randomly.
Pair Corralation between Epsilon Energy and Northern Oil
Given the investment horizon of 90 days Epsilon Energy is expected to generate 0.84 times more return on investment than Northern Oil. However, Epsilon Energy is 1.19 times less risky than Northern Oil. It trades about 0.05 of its potential returns per unit of risk. Northern Oil Gas is currently generating about 0.04 per unit of risk. If you would invest 494.00 in Epsilon Energy on August 24, 2024 and sell it today you would earn a total of 108.00 from holding Epsilon Energy or generate 21.86% 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. Northern Oil Gas
Performance |
| Timeline |
| Epsilon Energy |
| Northern Oil Gas |
Epsilon Energy and Northern Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and Northern Oil
The main advantage of trading using opposite Epsilon Energy and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, Northern Oil 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 Northern Oil will offset losses from the drop in Northern Oil'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 |
| Northern Oil vs. Houston American Energy | Northern Oil vs. Mexco Energy | Northern Oil vs. Ring Energy | Northern Oil 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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