Correlation Between Veren and Evolution Petroleum

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

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

Diversification Opportunities for Veren and Evolution Petroleum

-0.44

Correlation Coefficient

Veren  Evolution Petroleum

Very good diversification

The 3 months correlation between Veren and Evolution is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Veren Inc and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Veren 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 Veren Inc are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Veren i.e., Veren and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Veren and Evolution Petroleum

Considering the 90-day investment horizon Veren Inc is expected to under-perform the Evolution Petroleum. In addition to that, Veren is 1.38 times more volatile than Evolution Petroleum. It trades about -0.12 of its total potential returns per unit of risk. Evolution Petroleum is currently generating about 0.02 per unit of volatility. If you would invest  541.00  in Evolution Petroleum on September 15, 2024 and sell it today you would earn a total of  8.00  from holding Evolution Petroleum or generate 1.48% return on investment over 90 days.

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

Veren Inc  vs.  Evolution Petroleum

Veren Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veren Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Evolution Petroleum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Evolution Petroleum is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Veren and Evolution Petroleum

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

The idea behind Veren Inc and Evolution 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.