Correlation Between Permian Resources and FAR
Can any of the company-specific risk be diversified away by investing in both Permian Resources and FAR 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 FAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Resources and FAR Limited, you can compare the effects of market volatilities on Permian Resources and FAR 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 FAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and FAR.
Diversification Opportunities for Permian Resources and FAR
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Permian and FAR is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and FAR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAR Limited 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 FAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAR Limited has no effect on the direction of Permian Resources i.e., Permian Resources and FAR go up and down completely randomly.
Pair Corralation between Permian Resources and FAR
Allowing for the 90-day total investment horizon Permian Resources is expected to under-perform the FAR. In addition to that, Permian Resources is 2.27 times more volatile than FAR Limited. It trades about -0.18 of its total potential returns per unit of risk. FAR Limited is currently generating about -0.32 per unit of volatility. If you would invest 33.00 in FAR Limited on November 27, 2024 and sell it today you would lose (2.00) from holding FAR Limited or give up 6.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Permian Resources vs. FAR Limited
Performance |
| Timeline |
| Permian Resources |
| FAR Limited |
Permian Resources and FAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and FAR
The main advantage of trading using opposite Permian Resources and FAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, FAR 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 FAR will offset losses from the drop in FAR's long position.| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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