Correlation Between Vaalco Energy and PHX Minerals

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

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

Diversification Opportunities for Vaalco Energy and PHX Minerals

0.2

Correlation Coefficient

Vaalco Energy  PHX Minerals

Modest diversification

The 3 months correlation between Vaalco and PHX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy and PHX Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Minerals and Vaalco 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 Vaalco Energy are associated (or correlated) with PHX Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Minerals has no effect on the direction of Vaalco Energy i.e., Vaalco Energy and PHX Minerals go up and down completely randomly.

Pair Corralation between Vaalco Energy and PHX Minerals

Considering the 90-day investment horizon Vaalco Energy is expected to under-perform the PHX Minerals. In addition to that, Vaalco Energy is 1.51 times more volatile than PHX Minerals. It trades about -0.02 of its total potential returns per unit of risk. PHX Minerals is currently generating about 0.02 per unit of volatility. If you would invest  393.00  in PHX Minerals on December 28, 2024 and sell it today you would earn a total of  5.00  from holding PHX Minerals or generate 1.27% return on investment over 90 days.

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

Vaalco Energy  vs.  PHX Minerals

Vaalco Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vaalco Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Vaalco Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

PHX Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, PHX Minerals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vaalco Energy and PHX Minerals

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

The idea behind Vaalco Energy and PHX Minerals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.