Correlation Between San Juan and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both San Juan and Epsilon 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 San Juan and Epsilon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between San Juan Basin and Epsilon Energy, you can compare the effects of market volatilities on San Juan and Epsilon 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 San Juan with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Juan and Epsilon Energy.
Diversification Opportunities for San Juan and Epsilon Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between San and Epsilon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and San Juan 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 San Juan Basin are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of San Juan i.e., San Juan and Epsilon Energy go up and down completely randomly.
Pair Corralation between San Juan and Epsilon Energy
Considering the 90-day investment horizon San Juan Basin is expected to generate 1.35 times more return on investment than Epsilon Energy. However, San Juan is 1.35 times more volatile than Epsilon Energy. It trades about 0.21 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.06 per unit of risk. If you would invest 391.00 in San Juan Basin on September 2, 2024 and sell it today you would earn a total of 56.00 from holding San Juan Basin or generate 14.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
San Juan Basin vs. Epsilon Energy
Performance |
| Timeline |
| San Juan Basin |
| Epsilon Energy |
San Juan and Epsilon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with San Juan and Epsilon Energy
The main advantage of trading using opposite San Juan and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Juan position performs unexpectedly, Epsilon 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.| San Juan vs. Epsilon Energy | San Juan vs. Crescent Energy Co | San Juan vs. Evolution Petroleum | San Juan vs. XXL Energy Corp |
| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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