Correlation Between Empire Petroleum and Permianville Royalty

Can any of the company-specific risk be diversified away by investing in both Empire Petroleum and Permianville Royalty 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 Permianville Royalty 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 Permianville Royalty Trust, you can compare the effects of market volatilities on Empire Petroleum and Permianville Royalty 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 Permianville Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Petroleum and Permianville Royalty.

Diversification Opportunities for Empire Petroleum and Permianville Royalty

-0.52

Correlation Coefficient

Empire Petroleum  Permianville Royalty

Excellent diversification

The 3 months correlation between Empire and Permianville is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and Permianville Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permianville Royalty 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 Permianville Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permianville Royalty has no effect on the direction of Empire Petroleum i.e., Empire Petroleum and Permianville Royalty go up and down completely randomly.

Pair Corralation between Empire Petroleum and Permianville Royalty

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to generate 3.27 times more return on investment than Permianville Royalty. However, Empire Petroleum is 3.27 times more volatile than Permianville Royalty Trust. It trades about 0.22 of its potential returns per unit of risk. Permianville Royalty Trust is currently generating about -0.37 per unit of risk. If you would invest  575.00  in Empire Petroleum Corp on September 25, 2024 and sell it today you would earn a total of  155.00  from holding Empire Petroleum Corp or generate 26.96% return on investment over 90 days.

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

Empire Petroleum Corp  vs.  Permianville Royalty Trust

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 conflicting basic indicators, Empire Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Empire Petroleum and Permianville Royalty

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

The idea behind Empire Petroleum Corp and Permianville Royalty Trust 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.