Correlation Between PHX Minerals and Denbury Resources

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

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

Diversification Opportunities for PHX Minerals and Denbury Resources

-0.52

Correlation Coefficient

PHX Minerals  Denbury Resources

Excellent diversification

The 3 months correlation between PHX and Denbury is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PHX Minerals and Denbury Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denbury Resources and PHX Minerals 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 PHX Minerals are associated (or correlated) with Denbury Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denbury Resources has no effect on the direction of PHX Minerals i.e., PHX Minerals and Denbury Resources go up and down completely randomly.

Pair Corralation between PHX Minerals and Denbury Resources

If you would invest  352.00  in PHX Minerals on September 17, 2024 and sell it today you would earn a total of  49.00  from holding PHX Minerals or generate 13.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.0%
Values	Daily Returns

PHX Minerals  vs.  Denbury Resources

PHX Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical indicators, PHX Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Denbury Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PHX Minerals and Denbury Resources

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

The idea behind PHX Minerals and Denbury 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.