Correlation Between Barnwell Industries and Permian Resources

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

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

Diversification Opportunities for Barnwell Industries and Permian Resources

-0.58

Correlation Coefficient

Barnwell Industries  Permian Resources

Excellent diversification

The 3 months correlation between Barnwell and Permian is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Barnwell Industries 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 Barnwell Industries are associated (or correlated) with Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Barnwell Industries i.e., Barnwell Industries and Permian Resources go up and down completely randomly.

Pair Corralation between Barnwell Industries and Permian Resources

Considering the 90-day investment horizon Barnwell Industries is expected to under-perform the Permian Resources. In addition to that, Barnwell Industries is 1.13 times more volatile than Permian Resources. It trades about -0.23 of its total potential returns per unit of risk. Permian Resources is currently generating about 0.09 per unit of volatility. If you would invest  1,410  in Permian Resources on August 30, 2024 and sell it today you would earn a total of  149.00  from holding Permian Resources or generate 10.57% return on investment over 90 days.

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

Barnwell Industries  vs.  Permian Resources

Barnwell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barnwell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Permian Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Permian Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Barnwell Industries and Permian Resources

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

The idea behind Barnwell Industries and Permian Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.