Correlation Between Hillcrest Energy and Permian Resources

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

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

Diversification Opportunities for Hillcrest Energy and Permian Resources

-0.65

Correlation Coefficient

Hillcrest Energy  Permian Resources

Excellent diversification

The 3 months correlation between Hillcrest and Permian is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hillcrest Energy Technologies and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Hillcrest 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 Hillcrest Energy Technologies are associated (or correlated) with Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Hillcrest Energy i.e., Hillcrest Energy and Permian Resources go up and down completely randomly.

Pair Corralation between Hillcrest Energy and Permian Resources

Assuming the 90 days horizon Hillcrest Energy Technologies is expected to under-perform the Permian Resources. In addition to that, Hillcrest Energy is 3.11 times more volatile than Permian Resources. It trades about -0.07 of its total potential returns per unit of risk. Permian Resources is currently generating about 0.12 per unit of volatility. If you would invest  1,303  in Permian Resources on September 12, 2024 and sell it today you would earn a total of  199.00  from holding Permian Resources or generate 15.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Hillcrest Energy Technologies  vs.  Permian Resources

Hillcrest Energy Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hillcrest Energy Technologies 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Permian Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Permian Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hillcrest Energy and Permian Resources

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

The idea behind Hillcrest Energy Technologies and Permian 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.