Correlation Between Epsilon Energy and Petrus Resources

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

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

Diversification Opportunities for Epsilon Energy and Petrus Resources

0.05

Correlation Coefficient

Epsilon Energy  Petrus Resources

Significant diversification

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

Pair Corralation between Epsilon Energy and Petrus Resources

Given the investment horizon of 90 days Epsilon Energy is expected to generate 1.07 times more return on investment than Petrus Resources. However, Epsilon Energy is 1.07 times more volatile than Petrus Resources. It trades about 0.24 of its potential returns per unit of risk. Petrus Resources is currently generating about 0.01 per unit of risk. If you would invest  592.00  in Epsilon Energy on October 9, 2024 and sell it today you would earn a total of  64.00  from holding Epsilon Energy or generate 10.81% return on investment over 90 days.

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

Epsilon Energy  vs.  Petrus Resources

Epsilon Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Epsilon Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Petrus Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrus Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Petrus Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Epsilon Energy and Petrus Resources

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

The idea behind Epsilon Energy and Petrus Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.