Correlation Between Ring Energy and Permian Resources
Can any of the company-specific risk be diversified away by investing in both Ring Energy and Permian 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 Ring Energy and Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ring Energy and Permian Resources, you can compare the effects of market volatilities on Ring Energy and Permian 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 Ring Energy with a short position of Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ring Energy and Permian Resources.
Diversification Opportunities for Ring Energy and Permian Resources
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ring and Permian is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ring Energy and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Ring Energy 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 Ring Energy are associated (or correlated) with Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Ring Energy i.e., Ring Energy and Permian Resources go up and down completely randomly.
Pair Corralation between Ring Energy and Permian Resources
Considering the 90-day investment horizon Ring Energy is expected to generate 1.77 times less return on investment than Permian Resources. In addition to that, Ring Energy is 1.99 times more volatile than Permian Resources. It trades about 0.11 of its total potential returns per unit of risk. Permian Resources is currently generating about 0.37 per unit of volatility. If you would invest 1,397 in Permian Resources on August 25, 2024 and sell it today you would earn a total of 224.00 from holding Permian Resources or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ring Energy vs. Permian Resources
Performance |
| Timeline |
| Ring Energy |
| Permian Resources |
Ring Energy and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ring Energy and Permian Resources
The main advantage of trading using opposite Ring Energy and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ring Energy position performs unexpectedly, Permian 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 Permian Resources will offset losses from the drop in Permian Resources' long position.| Ring Energy vs. Vital Energy | Ring Energy vs. Permian Resources | Ring Energy vs. Magnolia Oil Gas | Ring Energy vs. SM Energy Co |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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