Correlation Between Ring Energy and Battalion Oil

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

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

Diversification Opportunities for Ring Energy and Battalion Oil

-0.27

Correlation Coefficient

Ring Energy  Battalion Oil

Very good diversification

The 3 months correlation between Ring and Battalion is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ring Energy and Battalion Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battalion Oil Corp and Ring Energy 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 Ring Energy are associated (or correlated) with Battalion Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battalion Oil Corp has no effect on the direction of Ring Energy i.e., Ring Energy and Battalion Oil go up and down completely randomly.

Pair Corralation between Ring Energy and Battalion Oil

Considering the 90-day investment horizon Ring Energy is expected to generate 0.33 times more return on investment than Battalion Oil. However, Ring Energy is 3.06 times less risky than Battalion Oil. It trades about 0.05 of its potential returns per unit of risk. Battalion Oil Corp is currently generating about -0.19 per unit of risk. If you would invest  146.00  in Ring Energy on September 4, 2024 and sell it today you would earn a total of  4.00  from holding Ring Energy or generate 2.74% return on investment over 90 days.

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

Ring Energy  vs.  Battalion Oil Corp

Ring Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Ring Energy is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Battalion Oil Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Battalion Oil Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Battalion Oil disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ring Energy and Battalion Oil

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

The idea behind Ring Energy and Battalion Oil 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.