Correlation Between EOG Resources and Horizon Oil

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

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

Diversification Opportunities for EOG Resources and Horizon Oil

-0.27

Correlation Coefficient

EOG Resources  Horizon Oil

Very good diversification

The 3 months correlation between EOG and Horizon is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Horizon Oil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Oil Limited and EOG Resources 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 EOG Resources are associated (or correlated) with Horizon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Oil Limited has no effect on the direction of EOG Resources i.e., EOG Resources and Horizon Oil go up and down completely randomly.

Pair Corralation between EOG Resources and Horizon Oil

Considering the 90-day investment horizon EOG Resources is expected to generate 11.72 times less return on investment than Horizon Oil. But when comparing it to its historical volatility, EOG Resources is 7.27 times less risky than Horizon Oil. It trades about 0.04 of its potential returns per unit of risk. Horizon Oil Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Horizon Oil Limited on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Horizon Oil Limited or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.19%
Values	Daily Returns

EOG Resources  vs.  Horizon Oil Limited

EOG Resources

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EOG Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Horizon Oil Limited

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Horizon Oil Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Horizon Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EOG Resources and Horizon Oil

The main advantage of trading using opposite EOG Resources and Horizon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources position performs unexpectedly, Horizon Oil 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 Horizon Oil will offset losses from the drop in Horizon Oil's long position.

The idea behind EOG Resources and Horizon Oil Limited 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.