Correlation Between Permianville Royalty and Epsilon Energy

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

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

Diversification Opportunities for Permianville Royalty and Epsilon Energy

-0.11

Correlation Coefficient

Permianville Royalty  Epsilon Energy

Good diversification

The 3 months correlation between Permianville and Epsilon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and Permianville Royalty 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 Permianville Royalty Trust are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Epsilon Energy go up and down completely randomly.

Pair Corralation between Permianville Royalty and Epsilon Energy

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the Epsilon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Permianville Royalty Trust is 1.3 times less risky than Epsilon Energy. The stock trades about -0.12 of its potential returns per unit of risk. The Epsilon Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  547.00  in Epsilon Energy on September 25, 2024 and sell it today you would earn a total of  35.00  from holding Epsilon Energy or generate 6.4% return on investment over 90 days.

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

Permianville Royalty Trust  vs.  Epsilon Energy

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust 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 basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Epsilon Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Epsilon Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Permianville Royalty and Epsilon Energy

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

The idea behind Permianville Royalty Trust and Epsilon Energy 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.