Correlation Between Permian Resources and ERHC Energy
Can any of the company-specific risk be diversified away by investing in both Permian Resources and ERHC 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 Permian Resources and ERHC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Resources and ERHC Energy, you can compare the effects of market volatilities on Permian Resources and ERHC 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 Permian Resources with a short position of ERHC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and ERHC Energy.
Diversification Opportunities for Permian Resources and ERHC Energy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Permian and ERHC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and ERHC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERHC Energy and Permian Resources 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 Permian Resources are associated (or correlated) with ERHC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERHC Energy has no effect on the direction of Permian Resources i.e., Permian Resources and ERHC Energy go up and down completely randomly.
Pair Corralation between Permian Resources and ERHC Energy
Allowing for the 90-day total investment horizon Permian Resources is expected to generate 114.71 times less return on investment than ERHC Energy. But when comparing it to its historical volatility, Permian Resources is 49.75 times less risky than ERHC Energy. It trades about 0.07 of its potential returns per unit of risk. ERHC Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.01 in ERHC Energy on August 30, 2024 and sell it today you would earn a total of 0.20 from holding ERHC Energy or generate 2000.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. ERHC Energy
Performance |
| Timeline |
| Permian Resources |
| ERHC Energy |
Permian Resources and ERHC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and ERHC Energy
The main advantage of trading using opposite Permian Resources and ERHC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, ERHC 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 ERHC Energy will offset losses from the drop in ERHC Energy's long position.| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources vs. Range Resources Corp |
| ERHC Energy vs. Frontera Energy Corp | ERHC Energy vs. Coterra Energy | ERHC Energy vs. Eco Oil Gas | ERHC Energy vs. PetroTal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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