Correlation Between Hess and Evolution Petroleum
Can any of the company-specific risk be diversified away by investing in both Hess and Evolution Petroleum 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 Hess and Evolution Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and Evolution Petroleum, you can compare the effects of market volatilities on Hess and Evolution Petroleum 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 Hess with a short position of Evolution Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and Evolution Petroleum.
Diversification Opportunities for Hess and Evolution Petroleum
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hess and Evolution is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Hess 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 Hess Corporation are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Hess i.e., Hess and Evolution Petroleum go up and down completely randomly.
Pair Corralation between Hess and Evolution Petroleum
Considering the 90-day investment horizon Hess is expected to generate 1.72 times less return on investment than Evolution Petroleum. But when comparing it to its historical volatility, Hess Corporation is 1.55 times less risky than Evolution Petroleum. It trades about 0.01 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 559.00 in Evolution Petroleum on November 1, 2024 and sell it today you would lose (12.00) from holding Evolution Petroleum or give up 2.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. Evolution Petroleum
Performance |
| Timeline |
| Hess |
| Evolution Petroleum |
Hess and Evolution Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and Evolution Petroleum
The main advantage of trading using opposite Hess and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, Evolution Petroleum 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 Evolution Petroleum will offset losses from the drop in Evolution Petroleum's long position.The idea behind Hess Corporation and Evolution Petroleum pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Evolution Petroleum vs. GeoPark | Evolution Petroleum vs. Granite Ridge Resources | Evolution Petroleum vs. PHX Minerals | Evolution Petroleum vs. California 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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