Correlation Between EQT and Permianville Royalty

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

By analyzing existing cross correlation between EQT Corporation and Permianville Royalty Trust, you can compare the effects of market volatilities on EQT 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 EQT with a short position of Permianville Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQT and Permianville Royalty.

Diversification Opportunities for EQT and Permianville Royalty

-0.42

Correlation Coefficient

EQT  Permianville Royalty

Very good diversification

The 3 months correlation between EQT and Permianville is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding EQT 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 EQT 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 EQT Corporation 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 EQT i.e., EQT and Permianville Royalty go up and down completely randomly.

Pair Corralation between EQT and Permianville Royalty

Considering the 90-day investment horizon EQT Corporation is expected to generate 1.08 times more return on investment than Permianville Royalty. However, EQT is 1.08 times more volatile than Permianville Royalty Trust. It trades about -0.05 of its potential returns per unit of risk. Permianville Royalty Trust is currently generating about -0.42 per unit of risk. If you would invest  4,556  in EQT Corporation on September 27, 2024 and sell it today you would lose (98.00) from holding EQT Corporation or give up 2.15% of portfolio value over 90 days.

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

EQT Corp.  vs.  Permianville Royalty Trust

EQT Corporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, EQT unveiled 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 EQT and Permianville Royalty

The main advantage of trading using opposite EQT and Permianville Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQT 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 EQT Corporation 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.