Correlation Between Earthstone Energy and XXL Energy
Can any of the company-specific risk be diversified away by investing in both Earthstone Energy and XXL 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 Earthstone Energy and XXL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Earthstone Energy and XXL Energy Corp, you can compare the effects of market volatilities on Earthstone Energy and XXL 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 Earthstone Energy with a short position of XXL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earthstone Energy and XXL Energy.
Diversification Opportunities for Earthstone Energy and XXL Energy
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Earthstone and XXL is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and XXL Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL Energy Corp and Earthstone 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 Earthstone Energy are associated (or correlated) with XXL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL Energy Corp has no effect on the direction of Earthstone Energy i.e., Earthstone Energy and XXL Energy go up and down completely randomly.
Pair Corralation between Earthstone Energy and XXL Energy
Given the investment horizon of 90 days Earthstone Energy is expected to generate 0.48 times more return on investment than XXL Energy. However, Earthstone Energy is 2.1 times less risky than XXL Energy. It trades about 0.19 of its potential returns per unit of risk. XXL Energy Corp is currently generating about -0.06 per unit of risk. If you would invest 1,330 in Earthstone Energy on August 31, 2024 and sell it today you would earn a total of 202.00 from holding Earthstone Energy or generate 15.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 8.58% |
| Values | Daily Returns |
Earthstone Energy vs. XXL Energy Corp
Performance |
| Timeline |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| XXL Energy Corp |
Earthstone Energy and XXL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Earthstone Energy and XXL Energy
The main advantage of trading using opposite Earthstone Energy and XXL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earthstone Energy position performs unexpectedly, XXL 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 XXL Energy will offset losses from the drop in XXL Energy's long position.| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone Energy vs. Obsidian Energy |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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