Correlation Between Calumet Specialty and Permian Resources

Can any of the company-specific risk be diversified away by investing in both Calumet Specialty 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 Calumet Specialty and Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Calumet Specialty Products and Permian Resources, you can compare the effects of market volatilities on Calumet Specialty 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 Calumet Specialty with a short position of Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calumet Specialty and Permian Resources.

Diversification Opportunities for Calumet Specialty and Permian Resources

0.6

Correlation Coefficient

Calumet Specialty  Permian Resources

Poor diversification

The 3 months correlation between Calumet and Permian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Calumet Specialty Products and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Calumet Specialty 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 Calumet Specialty Products 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 Calumet Specialty i.e., Calumet Specialty and Permian Resources go up and down completely randomly.

Pair Corralation between Calumet Specialty and Permian Resources

Given the investment horizon of 90 days Calumet Specialty Products is expected to generate 1.56 times more return on investment than Permian Resources. However, Calumet Specialty is 1.56 times more volatile than Permian Resources. It trades about 0.06 of its potential returns per unit of risk. Permian Resources is currently generating about 0.03 per unit of risk. If you would invest  1,829  in Calumet Specialty Products on September 17, 2024 and sell it today you would earn a total of  189.00  from holding Calumet Specialty Products or generate 10.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Calumet Specialty Products  vs.  Permian Resources

Calumet Specialty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Calumet Specialty Products are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, Calumet Specialty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Permian Resources

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Calumet Specialty and Permian Resources

The main advantage of trading using opposite Calumet Specialty and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calumet Specialty 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.

The idea behind Calumet Specialty Products and Permian Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .