Correlation Between PetroShale and EQT

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

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

Diversification Opportunities for PetroShale and EQT

-0.77

Correlation Coefficient

PetroShale  EQT

Pay attention - limited upside

The 3 months correlation between PetroShale and EQT is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation and PetroShale 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 PetroShale 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 PetroShale i.e., PetroShale and EQT go up and down completely randomly.

Pair Corralation between PetroShale and EQT

Assuming the 90 days horizon PetroShale is expected to under-perform the EQT. But the otc stock apears to be less risky and, when comparing its historical volatility, PetroShale is 1.18 times less risky than EQT. The otc stock trades about -0.11 of its potential returns per unit of risk. The EQT Corporation is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,313  in EQT Corporation on September 17, 2024 and sell it today you would earn a total of  1,190  from holding EQT Corporation or generate 35.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PetroShale  vs.  EQT Corp.

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

EQT Corporation

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 17 (%) 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 PetroShale and EQT

The main advantage of trading using opposite PetroShale and EQT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale 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 PetroShale 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.