Correlation Between Evolution Petroleum and PHX Minerals

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

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

Diversification Opportunities for Evolution Petroleum and PHX Minerals

-0.23

Correlation Coefficient

Evolution Petroleum  PHX Minerals

Very good diversification

The 3 months correlation between Evolution and PHX is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum and PHX Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Minerals and Evolution 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 Evolution Petroleum are associated (or correlated) with PHX Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Minerals has no effect on the direction of Evolution Petroleum i.e., Evolution Petroleum and PHX Minerals go up and down completely randomly.

Pair Corralation between Evolution Petroleum and PHX Minerals

Considering the 90-day investment horizon Evolution Petroleum is expected to under-perform the PHX Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Evolution Petroleum is 1.02 times less risky than PHX Minerals. The stock trades about -0.08 of its potential returns per unit of risk. The PHX Minerals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  352.00  in PHX Minerals on November 19, 2024 and sell it today you would earn a total of  61.00  from holding PHX Minerals or generate 17.33% return on investment over 90 days.

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

Evolution Petroleum  vs.  PHX Minerals

Evolution Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

PHX Minerals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, PHX Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution Petroleum and PHX Minerals

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

The idea behind Evolution Petroleum and PHX Minerals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.