Correlation Between EOG Resources and Permianville Royalty
Can any of the company-specific risk be diversified away by investing in both EOG Resources and Permianville Royalty 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 Permianville Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and Permianville Royalty Trust, you can compare the effects of market volatilities on EOG Resources and Permianville Royalty 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 Permianville Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Permianville Royalty.
Diversification Opportunities for EOG Resources and Permianville Royalty
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EOG and Permianville is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Permianville Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permianville Royalty 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 Permianville Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permianville Royalty has no effect on the direction of EOG Resources i.e., EOG Resources and Permianville Royalty go up and down completely randomly.
Pair Corralation between EOG Resources and Permianville Royalty
Considering the 90-day investment horizon EOG Resources is expected to generate 0.58 times more return on investment than Permianville Royalty. However, EOG Resources is 1.73 times less risky than Permianville Royalty. It trades about -0.45 of its potential returns per unit of risk. Permianville Royalty Trust is currently generating about -0.28 per unit of risk. If you would invest 13,198 in EOG Resources on September 24, 2024 and sell it today you would lose (1,234) from holding EOG Resources or give up 9.35% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
EOG Resources vs. Permianville Royalty Trust
Performance |
Timeline |
EOG Resources |
Permianville Royalty |
EOG Resources and Permianville Royalty Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EOG Resources and Permianville Royalty
The main advantage of trading using opposite EOG Resources and Permianville Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources position performs unexpectedly, Permianville Royalty 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 Permianville Royalty will offset losses from the drop in Permianville Royalty's long position.EOG Resources vs. Permianville Royalty Trust | EOG Resources vs. Mesa Royalty Trust | EOG Resources vs. Sabine Royalty Trust | EOG Resources vs. San Juan Basin |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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