Correlation Between Evolution Petroleum and Trio Petroleum

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

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

Diversification Opportunities for Evolution Petroleum and Trio Petroleum

-0.59

Correlation Coefficient

Evolution Petroleum  Trio Petroleum

Excellent diversification

The 3 months correlation between Evolution and Trio is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum 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 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 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 Evolution Petroleum i.e., Evolution Petroleum and Trio Petroleum go up and down completely randomly.

Pair Corralation between Evolution Petroleum and Trio Petroleum

Considering the 90-day investment horizon Evolution Petroleum is expected to generate 0.29 times more return on investment than Trio Petroleum. However, Evolution Petroleum is 3.39 times less risky than Trio Petroleum. It trades about -0.03 of its potential returns per unit of risk. Trio Petroleum Corp is currently generating about -0.31 per unit of risk. If you would invest  549.00  in Evolution Petroleum on September 17, 2024 and sell it today you would lose (28.00) from holding Evolution Petroleum or give up 5.1% of portfolio value over 90 days.

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

Evolution Petroleum  vs.  Trio Petroleum Corp

Evolution Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolution Petroleum is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 uncertain 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 Evolution Petroleum and Trio Petroleum

The main advantage of trading using opposite Evolution Petroleum and Trio Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Petroleum 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 Evolution Petroleum 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.