Correlation Between Permianville Royalty and EOG Resources
Can any of the company-specific risk be diversified away by investing in both Permianville Royalty and EOG Resources 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 Permianville Royalty and EOG Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permianville Royalty Trust and EOG Resources, you can compare the effects of market volatilities on Permianville Royalty and EOG Resources 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 Permianville Royalty with a short position of EOG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permianville Royalty and EOG Resources.
Diversification Opportunities for Permianville Royalty and EOG Resources
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Permianville and EOG is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources and Permianville Royalty 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 Permianville Royalty Trust are associated (or correlated) with EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and EOG Resources go up and down completely randomly.
Pair Corralation between Permianville Royalty and EOG Resources
Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the EOG Resources. In addition to that, Permianville Royalty is 2.05 times more volatile than EOG Resources. It trades about -0.02 of its total potential returns per unit of risk. EOG Resources is currently generating about 0.01 per unit of volatility. If you would invest 11,518 in EOG Resources on September 25, 2024 and sell it today you would earn a total of 467.00 from holding EOG Resources or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permianville Royalty Trust vs. EOG Resources
Performance |
| Timeline |
| Permianville Royalty |
| EOG Resources |
Permianville Royalty and EOG Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permianville Royalty and EOG Resources
The main advantage of trading using opposite Permianville Royalty and EOG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permianville Royalty position performs unexpectedly, EOG Resources 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 EOG Resources will offset losses from the drop in EOG Resources' long position.| Permianville Royalty vs. Sabine Royalty Trust | Permianville Royalty vs. Cross Timbers Royalty | Permianville Royalty vs. MV Oil Trust | Permianville Royalty vs. San Juan Basin |
| EOG Resources vs. Permianville Royalty Trust | EOG Resources vs. Mesa Royalty Trust | EOG Resources vs. Sabine Royalty Trust | EOG Resources vs. San Juan Basin |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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