Correlation Between EQT and Prairie Provident

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

By analyzing existing cross correlation between EQT Corporation and Prairie Provident Resources, you can compare the effects of market volatilities on EQT and Prairie Provident 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 Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQT and Prairie Provident.

Diversification Opportunities for EQT and Prairie Provident

-0.72

Correlation Coefficient

EQT  Prairie Provident

Pay attention - limited upside

The 3 months correlation between EQT and Prairie is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding EQT Corp. and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident 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 Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of EQT i.e., EQT and Prairie Provident go up and down completely randomly.

Pair Corralation between EQT and Prairie Provident

Considering the 90-day investment horizon EQT is expected to generate 7.8 times less return on investment than Prairie Provident. But when comparing it to its historical volatility, EQT Corporation is 4.88 times less risky than Prairie Provident. It trades about 0.08 of its potential returns per unit of risk. Prairie Provident Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.79  in Prairie Provident Resources on September 17, 2024 and sell it today you would earn a total of  0.31  from holding Prairie Provident Resources or generate 17.32% return on investment over 90 days.

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

EQT Corp.  vs.  Prairie Provident Resources

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.

Prairie Provident

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prairie Provident Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Prairie Provident is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EQT and Prairie Provident

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

The idea behind EQT Corporation and Prairie Provident Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.