Correlation Between Evolution Petroleum and Questerre Energy

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

By analyzing existing cross correlation between Evolution Petroleum and Questerre Energy, you can compare the effects of market volatilities on Evolution Petroleum and Questerre Energy 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 Evolution Petroleum with a short position of Questerre Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Petroleum and Questerre Energy.

Diversification Opportunities for Evolution Petroleum and Questerre Energy

0.15

Correlation Coefficient

Evolution Petroleum  Questerre Energy

Average diversification

The 3 months correlation between Evolution and Questerre is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum and Questerre Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Questerre Energy and Evolution Petroleum 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 Evolution Petroleum are associated (or correlated) with Questerre Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Questerre Energy has no effect on the direction of Evolution Petroleum i.e., Evolution Petroleum and Questerre Energy go up and down completely randomly.

Pair Corralation between Evolution Petroleum and Questerre Energy

Considering the 90-day investment horizon Evolution Petroleum is expected to generate 0.68 times more return on investment than Questerre Energy. However, Evolution Petroleum is 1.46 times less risky than Questerre Energy. It trades about 0.11 of its potential returns per unit of risk. Questerre Energy is currently generating about 0.02 per unit of risk. If you would invest  490.00  in Evolution Petroleum on September 3, 2024 and sell it today you would earn a total of  96.00  from holding Evolution Petroleum or generate 19.59% return on investment over 90 days.

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

Evolution Petroleum  vs.  Questerre Energy

Evolution Petroleum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Evolution Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Questerre Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Questerre Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Questerre Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Evolution Petroleum and Questerre Energy

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

The idea behind Evolution Petroleum and Questerre Energy 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.