Correlation Between North European and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both North European and Epsilon 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 North European and Epsilon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North European Oil and Epsilon Energy, you can compare the effects of market volatilities on North European and Epsilon 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 North European with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of North European and Epsilon Energy.
Diversification Opportunities for North European and Epsilon Energy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and Epsilon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and North European 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 North European Oil are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of North European i.e., North European and Epsilon Energy go up and down completely randomly.
Pair Corralation between North European and Epsilon Energy
Considering the 90-day investment horizon North European Oil is expected to under-perform the Epsilon Energy. In addition to that, North European is 1.87 times more volatile than Epsilon Energy. It trades about -0.21 of its total potential returns per unit of risk. Epsilon Energy is currently generating about 0.01 per unit of volatility. If you would invest 593.00 in Epsilon Energy on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Epsilon Energy or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North European Oil vs. Epsilon Energy
Performance |
| Timeline |
| North European Oil |
| Epsilon Energy |
North European and Epsilon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North European and Epsilon Energy
The main advantage of trading using opposite North European and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North European position performs unexpectedly, Epsilon 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.| North European vs. ConocoPhillips | North European vs. Occidental Petroleum | North European vs. EOG Resources | North European vs. Coterra Energy |
| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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