Correlation Between PHX Minerals and California Resources

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

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

Diversification Opportunities for PHX Minerals and California Resources

0.06

Correlation Coefficient

PHX Minerals  California Resources

Significant diversification

The 3 months correlation between PHX and California is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PHX Minerals and California Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources Corp and PHX Minerals 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 Minerals are associated (or correlated) with California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources Corp has no effect on the direction of PHX Minerals i.e., PHX Minerals and California Resources go up and down completely randomly.

Pair Corralation between PHX Minerals and California Resources

Considering the 90-day investment horizon PHX Minerals is expected to generate 0.83 times more return on investment than California Resources. However, PHX Minerals is 1.2 times less risky than California Resources. It trades about 0.02 of its potential returns per unit of risk. California Resources Corp is currently generating about -0.08 per unit of risk. If you would invest  393.00  in PHX Minerals on December 28, 2024 and sell it today you would earn a total of  5.00  from holding PHX Minerals or generate 1.27% return on investment over 90 days.

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

PHX Minerals  vs.  California Resources Corp

PHX Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, PHX Minerals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

California Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PHX Minerals and California Resources

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

The idea behind PHX Minerals and California Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.