Correlation Between Houston American and Empire Petroleum

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

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

Diversification Opportunities for Houston American and Empire Petroleum

-0.02

Correlation Coefficient

Houston American  Empire Petroleum

Good diversification

The 3 months correlation between Houston and Empire is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Houston American Energy and Empire Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Petroleum Corp and Houston American 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 Houston American Energy are associated (or correlated) with Empire Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Petroleum Corp has no effect on the direction of Houston American i.e., Houston American and Empire Petroleum go up and down completely randomly.

Pair Corralation between Houston American and Empire Petroleum

Given the investment horizon of 90 days Houston American Energy is expected to generate 2.05 times more return on investment than Empire Petroleum. However, Houston American is 2.05 times more volatile than Empire Petroleum Corp. It trades about 0.02 of its potential returns per unit of risk. Empire Petroleum Corp is currently generating about -0.04 per unit of risk. If you would invest  120.00  in Houston American Energy on December 20, 2024 and sell it today you would lose (8.00) from holding Houston American Energy or give up 6.67% of portfolio value over 90 days.

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

Houston American Energy  vs.  Empire Petroleum Corp

Houston American Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Houston American Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Houston American may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Empire Petroleum Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Empire Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Houston American and Empire Petroleum

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

The idea behind Houston American Energy and Empire Petroleum Corp 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.