Correlation Between EOG Resources and Pancontinental Oil

Can any of the company-specific risk be diversified away by investing in both EOG Resources and Pancontinental 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 Pancontinental 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 Pancontinental Oil Gas, you can compare the effects of market volatilities on EOG Resources and Pancontinental 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 Pancontinental Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Pancontinental Oil.

Diversification Opportunities for EOG Resources and Pancontinental Oil

-0.08

Correlation Coefficient

EOG Resources  Pancontinental Oil

Good diversification

The 3 months correlation between EOG and Pancontinental is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Pancontinental Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pancontinental Oil Gas 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 Pancontinental Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pancontinental Oil Gas has no effect on the direction of EOG Resources i.e., EOG Resources and Pancontinental Oil go up and down completely randomly.

Pair Corralation between EOG Resources and Pancontinental Oil

Considering the 90-day investment horizon EOG Resources is expected to under-perform the Pancontinental Oil. But the stock apears to be less risky and, when comparing its historical volatility, EOG Resources is 8.74 times less risky than Pancontinental Oil. The stock trades about 0.0 of its potential returns per unit of risk. The Pancontinental Oil Gas is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.05  in Pancontinental Oil Gas on September 19, 2024 and sell it today you would earn a total of  0.35  from holding Pancontinental Oil Gas or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

EOG Resources  vs.  Pancontinental Oil Gas

EOG Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EOG Resources has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pancontinental Oil Gas

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pancontinental Oil Gas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Pancontinental Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EOG Resources and Pancontinental Oil

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

The idea behind EOG Resources and Pancontinental Oil Gas 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.