Correlation Between United Energy and Riley Exploration
Can any of the company-specific risk be diversified away by investing in both United Energy and Riley Exploration 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 United Energy and Riley Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Energy Corp and Riley Exploration Permian, you can compare the effects of market volatilities on United Energy and Riley Exploration 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 United Energy with a short position of Riley Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Energy and Riley Exploration.
Diversification Opportunities for United Energy and Riley Exploration
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Riley is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding United Energy Corp and Riley Exploration Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riley Exploration Permian and United 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 United Energy Corp are associated (or correlated) with Riley Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riley Exploration Permian has no effect on the direction of United Energy i.e., United Energy and Riley Exploration go up and down completely randomly.
Pair Corralation between United Energy and Riley Exploration
Given the investment horizon of 90 days United Energy Corp is expected to generate 4.9 times more return on investment than Riley Exploration. However, United Energy is 4.9 times more volatile than Riley Exploration Permian. It trades about 0.05 of its potential returns per unit of risk. Riley Exploration Permian is currently generating about 0.1 per unit of risk. If you would invest 5.00 in United Energy Corp on September 3, 2024 and sell it today you would lose (0.50) from holding United Energy Corp or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Energy Corp vs. Riley Exploration Permian
Performance |
| Timeline |
| United Energy Corp |
| Riley Exploration Permian |
United Energy and Riley Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Energy and Riley Exploration
The main advantage of trading using opposite United Energy and Riley Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Energy position performs unexpectedly, Riley Exploration 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 Riley Exploration will offset losses from the drop in Riley Exploration's long position.| United Energy vs. Advantage Solutions | United Energy vs. Atlas Corp | United Energy vs. PureCycle Technologies | United Energy vs. WM Technology |
| Riley Exploration vs. Vital Energy | Riley Exploration vs. Permian Resources | Riley Exploration vs. Magnolia Oil Gas | Riley Exploration vs. Ring 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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