Correlation Between Epsilon Energy and Southwestern Energy
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and Southwestern 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 Southwestern 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 Southwestern Energy, you can compare the effects of market volatilities on Epsilon Energy and Southwestern 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 Southwestern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and Southwestern Energy.
Diversification Opportunities for Epsilon Energy and Southwestern Energy
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Epsilon and Southwestern is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Southwestern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwestern 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 Southwestern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwestern Energy has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and Southwestern Energy go up and down completely randomly.
Pair Corralation between Epsilon Energy and Southwestern Energy
Given the investment horizon of 90 days Epsilon Energy is expected to generate 4.08 times less return on investment than Southwestern Energy. In addition to that, Epsilon Energy is 1.39 times more volatile than Southwestern Energy. It trades about 0.06 of its total potential returns per unit of risk. Southwestern Energy is currently generating about 0.32 per unit of volatility. If you would invest 620.00 in Southwestern Energy on August 28, 2024 and sell it today you would earn a total of 91.00 from holding Southwestern Energy or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 37.5% |
| Values | Daily Returns |
Epsilon Energy vs. Southwestern Energy
Performance |
| Timeline |
| Epsilon Energy |
| Southwestern Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Epsilon Energy and Southwestern Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and Southwestern Energy
The main advantage of trading using opposite Epsilon Energy and Southwestern Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, Southwestern 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 Southwestern Energy will offset losses from the drop in Southwestern 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 |
| Southwestern Energy vs. Antero Resources Corp | Southwestern Energy vs. EQT Corporation | Southwestern Energy vs. Matador Resources | Southwestern Energy vs. Range Resources Corp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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