Correlation Between Empire Petroleum and New Era

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

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

Diversification Opportunities for Empire Petroleum and New Era

-0.35

Correlation Coefficient

Empire Petroleum  New Era

Very good diversification

The 3 months correlation between Empire and New is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium and Empire Petroleum 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 Empire Petroleum Corp are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of Empire Petroleum i.e., Empire Petroleum and New Era go up and down completely randomly.

Pair Corralation between Empire Petroleum and New Era

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to under-perform the New Era. But the stock apears to be less risky and, when comparing its historical volatility, Empire Petroleum Corp is 5.81 times less risky than New Era. The stock trades about 0.0 of its potential returns per unit of risk. The New Era Helium is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  40.00  in New Era Helium on October 5, 2024 and sell it today you would lose (2.00) from holding New Era Helium or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.44%
Values	Daily Returns

Empire Petroleum Corp  vs.  New Era Helium

Empire Petroleum Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Petroleum Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Empire Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

New Era Helium

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Era Helium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, New Era showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire Petroleum and New Era

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

The idea behind Empire Petroleum Corp and New Era Helium 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.