Correlation Between Crescent Energy and Evolution Petroleum

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

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

Diversification Opportunities for Crescent Energy and Evolution Petroleum

0.62

Correlation Coefficient

Crescent Energy  Evolution Petroleum

Poor diversification

The 3 months correlation between Crescent and Evolution is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Energy Co and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Crescent 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 Crescent Energy Co 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 Crescent Energy i.e., Crescent Energy and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Crescent Energy and Evolution Petroleum

Given the investment horizon of 90 days Crescent Energy Co is expected to generate 0.91 times more return on investment than Evolution Petroleum. However, Crescent Energy Co is 1.1 times less risky than Evolution Petroleum. It trades about 0.19 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.12 per unit of risk. If you would invest  1,105  in Crescent Energy Co on September 4, 2024 and sell it today you would earn a total of  378.00  from holding Crescent Energy Co or generate 34.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Crescent Energy Co  vs.  Evolution Petroleum

Crescent Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Energy Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Crescent Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Evolution Petroleum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Evolution Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Energy and Evolution Petroleum

The main advantage of trading using opposite Crescent Energy and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Energy 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 Crescent Energy Co 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.