Correlation Between Permian Resources and Callon Petroleum

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

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

Diversification Opportunities for Permian Resources and Callon Petroleum

0.55

Correlation Coefficient

Permian Resources  Callon Petroleum

Very weak diversification

The 3 months correlation between Permian and Callon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Callon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callon Petroleum and Permian Resources 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 Permian Resources are associated (or correlated) with Callon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callon Petroleum has no effect on the direction of Permian Resources i.e., Permian Resources and Callon Petroleum go up and down completely randomly.

Pair Corralation between Permian Resources and Callon Petroleum

If you would invest  1,363  in Permian Resources on September 2, 2024 and sell it today you would earn a total of  203.00  from holding Permian Resources or generate 14.89% return on investment over 90 days.

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

Permian Resources  vs.  Callon Petroleum

Permian Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Permian Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Callon Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Permian Resources and Callon Petroleum

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

The idea behind Permian Resources and Callon Petroleum 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.