Correlation Between Foothills Exploration and Permianville Royalty

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

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

Diversification Opportunities for Foothills Exploration and Permianville Royalty

0.0

Correlation Coefficient

Foothills Exploration  Permianville Royalty

Pay attention - limited upside

The 3 months correlation between Foothills and Permianville is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Foothills Exploration and Permianville Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permianville Royalty and Foothills Exploration 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 Foothills Exploration 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 Foothills Exploration i.e., Foothills Exploration and Permianville Royalty go up and down completely randomly.

Pair Corralation between Foothills Exploration and Permianville Royalty

If you would invest  133.00  in Permianville Royalty Trust on December 24, 2024 and sell it today you would earn a total of  23.00  from holding Permianville Royalty Trust or generate 17.29% return on investment over 90 days.

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

Foothills Exploration  vs.  Permianville Royalty Trust

Foothills Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Permianville Royalty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permianville Royalty Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Permianville Royalty disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foothills Exploration and Permianville Royalty

The main advantage of trading using opposite Foothills Exploration and Permianville Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foothills Exploration 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 Foothills Exploration 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.