Correlation Between Riley Exploration and XXL Energy

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

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

Diversification Opportunities for Riley Exploration and XXL Energy

-0.23

Correlation Coefficient

Riley Exploration  XXL Energy

Very good diversification

The 3 months correlation between Riley and XXL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Riley Exploration Permian and XXL Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL Energy Corp and Riley Exploration 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 Riley Exploration Permian are associated (or correlated) with XXL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL Energy Corp has no effect on the direction of Riley Exploration i.e., Riley Exploration and XXL Energy go up and down completely randomly.

Pair Corralation between Riley Exploration and XXL Energy

Given the investment horizon of 90 days Riley Exploration Permian is expected to generate 0.3 times more return on investment than XXL Energy. However, Riley Exploration Permian is 3.37 times less risky than XXL Energy. It trades about 0.1 of its potential returns per unit of risk. XXL Energy Corp is currently generating about -0.09 per unit of risk. If you would invest  2,613  in Riley Exploration Permian on September 1, 2024 and sell it today you would earn a total of  897.00  from holding Riley Exploration Permian or generate 34.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Riley Exploration Permian  vs.  XXL Energy Corp

Riley Exploration Permian

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Riley Exploration Permian are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Riley Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

XXL Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL Energy Corp 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Riley Exploration and XXL Energy

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

The idea behind Riley Exploration Permian and XXL 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.