Correlation Between E Split and PetroFrontier Corp

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

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

Diversification Opportunities for E Split and PetroFrontier Corp

-0.07

Correlation Coefficient

E Split  PetroFrontier Corp

Good diversification

The 3 months correlation between ENS-PA and PetroFrontier is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding E Split Corp and PetroFrontier Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroFrontier Corp and E Split 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 E Split Corp are associated (or correlated) with PetroFrontier Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroFrontier Corp has no effect on the direction of E Split i.e., E Split and PetroFrontier Corp go up and down completely randomly.

Pair Corralation between E Split and PetroFrontier Corp

Assuming the 90 days trading horizon E Split is expected to generate 37.48 times less return on investment than PetroFrontier Corp. But when comparing it to its historical volatility, E Split Corp is 23.26 times less risky than PetroFrontier Corp. It trades about 0.09 of its potential returns per unit of risk. PetroFrontier Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.50  in PetroFrontier Corp on December 25, 2024 and sell it today you would earn a total of  1.50  from holding PetroFrontier Corp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

E Split Corp  vs.  PetroFrontier Corp

E Split Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, E Split is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

PetroFrontier Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PetroFrontier Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PetroFrontier Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Split and PetroFrontier Corp

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

The idea behind E Split Corp and PetroFrontier Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.