Correlation Between Empire Petroleum and Riley Exploration

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

Diversification Opportunities for Empire Petroleum and Riley Exploration

-0.05

Correlation Coefficient

Empire Petroleum  Riley Exploration

Good diversification

The 3 months correlation between Empire and Riley is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and Riley Exploration Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riley Exploration Permian 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 Riley Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riley Exploration Permian has no effect on the direction of Empire Petroleum i.e., Empire Petroleum and Riley Exploration go up and down completely randomly.

Pair Corralation between Empire Petroleum and Riley Exploration

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to under-perform the Riley Exploration. In addition to that, Empire Petroleum is 1.48 times more volatile than Riley Exploration Permian. It trades about -0.07 of its total potential returns per unit of risk. Riley Exploration Permian is currently generating about 0.01 per unit of volatility. If you would invest  3,031  in Riley Exploration Permian on December 27, 2024 and sell it today you would lose (31.00) from holding Riley Exploration Permian or give up 1.02% of portfolio value over 90 days.

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

Empire Petroleum Corp  vs.  Riley Exploration Permian

Empire Petroleum Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Riley Exploration Permian

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Empire Petroleum and Riley Exploration

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

The idea behind Empire Petroleum Corp and Riley Exploration Permian 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.