Correlation Between Berry Petroleum and Evolution Petroleum

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

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

Diversification Opportunities for Berry Petroleum and Evolution Petroleum

-0.64

Correlation Coefficient

Berry Petroleum  Evolution Petroleum

Excellent diversification

The 3 months correlation between Berry and Evolution is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Berry Petroleum Corp and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Berry Petroleum 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 Berry Petroleum Corp 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 Berry Petroleum i.e., Berry Petroleum and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Berry Petroleum and Evolution Petroleum

Considering the 90-day investment horizon Berry Petroleum Corp is expected to under-perform the Evolution Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Berry Petroleum Corp is 1.02 times less risky than Evolution Petroleum. The stock trades about -0.15 of its potential returns per unit of risk. The Evolution Petroleum is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  471.00  in Evolution Petroleum on September 5, 2024 and sell it today you would earn a total of  114.00  from holding Evolution Petroleum or generate 24.2% return on investment over 90 days.

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

Berry Petroleum Corp  vs.  Evolution Petroleum

Berry Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berry Petroleum Corp 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Evolution Petroleum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Evolution Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berry Petroleum and Evolution Petroleum

The main advantage of trading using opposite Berry Petroleum and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berry Petroleum 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 Berry Petroleum Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.