Correlation Between Dorchester Minerals and Evolution Petroleum

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

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

Diversification Opportunities for Dorchester Minerals and Evolution Petroleum

0.6

Correlation Coefficient

Dorchester Minerals  Evolution Petroleum

Poor diversification

The 3 months correlation between Dorchester and Evolution is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dorchester Minerals LP and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Dorchester Minerals 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 Dorchester Minerals LP 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 Dorchester Minerals i.e., Dorchester Minerals and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Dorchester Minerals and Evolution Petroleum

Given the investment horizon of 90 days Dorchester Minerals LP is expected to generate 0.73 times more return on investment than Evolution Petroleum. However, Dorchester Minerals LP is 1.37 times less risky than Evolution Petroleum. It trades about 0.15 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.06 per unit of risk. If you would invest  2,894  in Dorchester Minerals LP on September 13, 2024 and sell it today you would earn a total of  384.00  from holding Dorchester Minerals LP or generate 13.27% return on investment over 90 days.

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

Dorchester Minerals LP  vs.  Evolution Petroleum

Dorchester Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorchester Minerals LP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Dorchester Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Evolution Petroleum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Evolution Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dorchester Minerals and Evolution Petroleum

The main advantage of trading using opposite Dorchester Minerals and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorchester Minerals 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 Dorchester Minerals LP 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.