Correlation Between Permian Resources and Brookside Energy
Can any of the company-specific risk be diversified away by investing in both Permian Resources and Brookside 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 Brookside 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 Brookside Energy, you can compare the effects of market volatilities on Permian Resources and Brookside 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 Brookside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Brookside Energy.
Diversification Opportunities for Permian Resources and Brookside Energy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Permian and Brookside is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Brookside Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookside 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 Brookside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookside Energy has no effect on the direction of Permian Resources i.e., Permian Resources and Brookside Energy go up and down completely randomly.
Pair Corralation between Permian Resources and Brookside Energy
Allowing for the 90-day total investment horizon Permian Resources is expected to generate 52.45 times less return on investment than Brookside Energy. But when comparing it to its historical volatility, Permian Resources is 125.31 times less risky than Brookside Energy. It trades about 0.51 of its potential returns per unit of risk. Brookside Energy is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.02 in Brookside Energy on August 27, 2024 and sell it today you would earn a total of 35.98 from holding Brookside Energy or generate 179900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. Brookside Energy
Performance |
| Timeline |
| Permian Resources |
| Brookside Energy |
Permian Resources and Brookside Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and Brookside Energy
The main advantage of trading using opposite Permian Resources and Brookside Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, Brookside 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 Brookside Energy will offset losses from the drop in Brookside 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 |
| Brookside Energy vs. Permian Resources | Brookside Energy vs. Devon Energy | Brookside Energy vs. EOG Resources | Brookside Energy vs. Coterra Energy |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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