Correlation Between EOG Resources and Trio Petroleum

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

By analyzing existing cross correlation between EOG Resources and Trio Petroleum Corp, you can compare the effects of market volatilities on EOG Resources and Trio Petroleum 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 Trio Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Trio Petroleum.

Diversification Opportunities for EOG Resources and Trio Petroleum

-0.49

Correlation Coefficient

EOG Resources  Trio Petroleum

Very good diversification

The 3 months correlation between EOG and Trio is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Trio Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trio Petroleum Corp 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 Trio Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trio Petroleum Corp has no effect on the direction of EOG Resources i.e., EOG Resources and Trio Petroleum go up and down completely randomly.

Pair Corralation between EOG Resources and Trio Petroleum

Considering the 90-day investment horizon EOG Resources is expected to generate 0.25 times more return on investment than Trio Petroleum. However, EOG Resources is 4.03 times less risky than Trio Petroleum. It trades about 0.02 of its potential returns per unit of risk. Trio Petroleum Corp is currently generating about -0.33 per unit of risk. If you would invest  12,349  in EOG Resources on September 18, 2024 and sell it today you would earn a total of  113.00  from holding EOG Resources or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EOG Resources  vs.  Trio Petroleum Corp

EOG Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 1 (%) 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.

Trio Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trio Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with EOG Resources and Trio Petroleum

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

The idea behind EOG Resources and Trio Petroleum Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.