Correlation Between PHX Minerals and US Energy

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

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

Diversification Opportunities for PHX Minerals and US Energy

0.76

Correlation Coefficient

PHX Minerals  US Energy

Poor diversification

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

Pair Corralation between PHX Minerals and US Energy

Considering the 90-day investment horizon PHX Minerals is expected to generate 4.81 times less return on investment than US Energy. But when comparing it to its historical volatility, PHX Minerals is 2.63 times less risky than US Energy. It trades about 0.09 of its potential returns per unit of risk. US Energy Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  94.00  in US Energy Corp on September 20, 2024 and sell it today you would earn a total of  58.00  from holding US Energy Corp or generate 61.7% 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.  US Energy Corp

PHX Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, PHX Minerals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

US Energy Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Energy Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, US Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PHX Minerals and US Energy

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

The idea behind PHX Minerals and US Energy 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.