Correlation Between Earthstone Energy and Battalion Oil

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

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

Diversification Opportunities for Earthstone Energy and Battalion Oil

-0.76

Correlation Coefficient

Earthstone Energy  Battalion Oil

Pay attention - limited upside

The 3 months correlation between Earthstone and Battalion is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and Battalion Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battalion Oil Corp and Earthstone Energy 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 Earthstone Energy are associated (or correlated) with Battalion Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battalion Oil Corp has no effect on the direction of Earthstone Energy i.e., Earthstone Energy and Battalion Oil go up and down completely randomly.

Pair Corralation between Earthstone Energy and Battalion Oil

If you would invest  305.00  in Battalion Oil Corp on September 17, 2024 and sell it today you would lose (3.00) from holding Battalion Oil Corp or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Earthstone Energy  vs.  Battalion Oil Corp

Earthstone Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earthstone Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Earthstone Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Battalion Oil Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Battalion Oil Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Battalion Oil disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Earthstone Energy and Battalion Oil

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

The idea behind Earthstone Energy and Battalion Oil 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 CEOs Directory module to screen CEOs from public companies around the world.