Correlation Between Permian Resources and Hess
Can any of the company-specific risk be diversified away by investing in both Permian Resources and Hess 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 Hess into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Resources and Hess Corporation, you can compare the effects of market volatilities on Permian Resources and Hess 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 Hess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Hess.
Diversification Opportunities for Permian Resources and Hess
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Permian and Hess is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Permian Resources i.e., Permian Resources and Hess go up and down completely randomly.
Pair Corralation between Permian Resources and Hess
Allowing for the 90-day total investment horizon Permian Resources is expected to generate 1.77 times more return on investment than Hess. However, Permian Resources is 1.77 times more volatile than Hess Corporation. It trades about 0.51 of its potential returns per unit of risk. Hess Corporation is currently generating about 0.4 per unit of risk. If you would invest 1,348 in Permian Resources on August 27, 2024 and sell it today you would earn a total of 273.00 from holding Permian Resources or generate 20.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. Hess Corp.
Performance |
| Timeline |
| Permian Resources |
| Hess |
Permian Resources and Hess Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and Hess
The main advantage of trading using opposite Permian Resources and Hess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, Hess 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 Hess will offset losses from the drop in Hess' 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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