Correlation Between EQT and PHX Minerals

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

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

Diversification Opportunities for EQT and PHX Minerals

0.7

Correlation Coefficient

EQT  PHX Minerals

Poor diversification

The 3 months correlation between EQT and PHX is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding EQT Corp. and PHX Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Minerals and EQT 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 EQT Corporation are associated (or correlated) with PHX Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Minerals has no effect on the direction of EQT i.e., EQT and PHX Minerals go up and down completely randomly.

Pair Corralation between EQT and PHX Minerals

Considering the 90-day investment horizon EQT Corporation is expected to generate 1.16 times more return on investment than PHX Minerals. However, EQT is 1.16 times more volatile than PHX Minerals. It trades about 0.24 of its potential returns per unit of risk. PHX Minerals is currently generating about 0.13 per unit of risk. If you would invest  3,272  in EQT Corporation on September 12, 2024 and sell it today you would earn a total of  1,286  from holding EQT Corporation or generate 39.3% return on investment over 90 days.

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

EQT Corp.  vs.  PHX Minerals

EQT Corporation

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

PHX Minerals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, PHX Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EQT and PHX Minerals

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

The idea behind EQT Corporation and PHX Minerals 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.