Correlation Between PHX Energy and High Arctic

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

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

Diversification Opportunities for PHX Energy and High Arctic

-0.27

Correlation Coefficient

PHX Energy  High Arctic

Very good diversification

The 3 months correlation between PHX and High is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy and PHX 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 PHX Energy Services are associated (or correlated) with High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of PHX Energy i.e., PHX Energy and High Arctic go up and down completely randomly.

Pair Corralation between PHX Energy and High Arctic

Assuming the 90 days trading horizon PHX Energy Services is expected to under-perform the High Arctic. But the stock apears to be less risky and, when comparing its historical volatility, PHX Energy Services is 1.39 times less risky than High Arctic. The stock trades about -0.12 of its potential returns per unit of risk. The High Arctic Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  111.00  in High Arctic Energy on September 9, 2024 and sell it today you would earn a total of  1.00  from holding High Arctic Energy or generate 0.9% return on investment over 90 days.

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

PHX Energy Services  vs.  High Arctic Energy

PHX Energy Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Energy Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PHX Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

High Arctic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, High Arctic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PHX Energy and High Arctic

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

The idea behind PHX Energy Services and High Arctic 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.