Correlation Between Mach Natural and Epsilon Energy

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

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

Diversification Opportunities for Mach Natural and Epsilon Energy

-0.34

Correlation Coefficient

Mach Natural  Epsilon Energy

Very good diversification

The 3 months correlation between Mach and Epsilon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Mach Natural Resources and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and Mach Natural 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 Mach Natural Resources are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of Mach Natural i.e., Mach Natural and Epsilon Energy go up and down completely randomly.

Pair Corralation between Mach Natural and Epsilon Energy

Considering the 90-day investment horizon Mach Natural Resources is expected to under-perform the Epsilon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Mach Natural Resources is 1.81 times less risky than Epsilon Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Epsilon Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  586.00  in Epsilon Energy on August 30, 2024 and sell it today you would lose (8.00) from holding Epsilon Energy or give up 1.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Mach Natural Resources  vs.  Epsilon Energy

Mach Natural Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mach Natural Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mach Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Epsilon Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 4 (%) 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 December 2024.

Pair Trading with Mach Natural and Epsilon Energy

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

The idea behind Mach Natural Resources and Epsilon Energy 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.