Correlation Between PHX Minerals and EQT

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

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

Diversification Opportunities for PHX Minerals and EQT

0.7

Correlation Coefficient

PHX Minerals  EQT

Poor diversification

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

Pair Corralation between PHX Minerals and EQT

Considering the 90-day investment horizon PHX Minerals is expected to generate 2.13 times less return on investment than EQT. But when comparing it to its historical volatility, PHX Minerals is 1.16 times less risky than EQT. It trades about 0.13 of its potential returns per unit of risk. EQT Corporation is currently generating about 0.24 of returns per unit of risk over similar time horizon. 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

PHX Minerals  vs.  EQT Corp.

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.

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.

Pair Trading with PHX Minerals and EQT

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

The idea behind PHX Minerals and EQT Corporation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.