Correlation Between EON Resources and Obsidian Energy

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

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

Diversification Opportunities for EON Resources and Obsidian Energy

0.8

Correlation Coefficient

EON Resources  Obsidian Energy

Very poor diversification

The 3 months correlation between EON and Obsidian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding EON Resources and Obsidian Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obsidian Energy and EON Resources 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 EON Resources are associated (or correlated) with Obsidian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obsidian Energy has no effect on the direction of EON Resources i.e., EON Resources and Obsidian Energy go up and down completely randomly.

Pair Corralation between EON Resources and Obsidian Energy

Given the investment horizon of 90 days EON Resources is expected to under-perform the Obsidian Energy. In addition to that, EON Resources is 6.7 times more volatile than Obsidian Energy. It trades about -0.01 of its total potential returns per unit of risk. Obsidian Energy is currently generating about -0.05 per unit of volatility. If you would invest  628.00  in Obsidian Energy on August 31, 2024 and sell it today you would lose (57.00) from holding Obsidian Energy or give up 9.08% of portfolio value over 90 days.

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

EON Resources  vs.  Obsidian Energy

EON Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Obsidian Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Obsidian Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EON Resources and Obsidian Energy

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

The idea behind EON Resources and Obsidian Energy 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.