Correlation Between Permian Basin and Excelerate Energy

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

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

Diversification Opportunities for Permian Basin and Excelerate Energy

0.56

Correlation Coefficient

Permian Basin  Excelerate Energy

Very weak diversification

The 3 months correlation between Permian and Excelerate is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Permian Basin Royalty and Excelerate Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excelerate Energy and Permian Basin 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 Permian Basin Royalty are associated (or correlated) with Excelerate Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excelerate Energy has no effect on the direction of Permian Basin i.e., Permian Basin and Excelerate Energy go up and down completely randomly.

Pair Corralation between Permian Basin and Excelerate Energy

Considering the 90-day investment horizon Permian Basin Royalty is expected to under-perform the Excelerate Energy. But the stock apears to be less risky and, when comparing its historical volatility, Permian Basin Royalty is 1.22 times less risky than Excelerate Energy. The stock trades about -0.06 of its potential returns per unit of risk. The Excelerate Energy is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,007  in Excelerate Energy on December 29, 2024 and sell it today you would lose (208.00) from holding Excelerate Energy or give up 6.92% of portfolio value over 90 days.

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

Permian Basin Royalty  vs.  Excelerate Energy

Permian Basin Royalty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Basin Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Excelerate Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Excelerate Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Excelerate Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Permian Basin and Excelerate Energy

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

The idea behind Permian Basin Royalty and Excelerate 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.