Correlation Between Permian Resources and SDX Energy
Can any of the company-specific risk be diversified away by investing in both Permian Resources and SDX 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 SDX 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 SDX Energy plc, you can compare the effects of market volatilities on Permian Resources and SDX 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 SDX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and SDX Energy.
Diversification Opportunities for Permian Resources and SDX Energy
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Permian and SDX is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and SDX Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SDX Energy plc 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 SDX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SDX Energy plc has no effect on the direction of Permian Resources i.e., Permian Resources and SDX Energy go up and down completely randomly.
Pair Corralation between Permian Resources and SDX Energy
Allowing for the 90-day total investment horizon Permian Resources is expected to generate 68.33 times less return on investment than SDX Energy. But when comparing it to its historical volatility, Permian Resources is 11.88 times less risky than SDX Energy. It trades about 0.02 of its potential returns per unit of risk. SDX Energy plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1.51 in SDX Energy plc on August 25, 2024 and sell it today you would earn a total of 0.49 from holding SDX Energy plc or generate 32.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. SDX Energy plc
Performance |
| Timeline |
| Permian Resources |
| SDX Energy plc |
Permian Resources and SDX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and SDX Energy
The main advantage of trading using opposite Permian Resources and SDX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, SDX 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 SDX Energy will offset losses from the drop in SDX 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 |
| SDX Energy vs. Permian Resources | SDX Energy vs. Devon Energy | SDX Energy vs. EOG Resources | SDX 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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