Correlation Between PHX Minerals and Empire Petroleum

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

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

Diversification Opportunities for PHX Minerals and Empire Petroleum

0.22

Correlation Coefficient

PHX Minerals  Empire Petroleum

Modest diversification

The 3 months correlation between PHX and Empire is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PHX Minerals 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 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 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 PHX Minerals i.e., PHX Minerals and Empire Petroleum go up and down completely randomly.

Pair Corralation between PHX Minerals and Empire Petroleum

Considering the 90-day investment horizon PHX Minerals is expected to generate 0.53 times more return on investment than Empire Petroleum. However, PHX Minerals is 1.88 times less risky than Empire Petroleum. It trades about 0.08 of its potential returns per unit of risk. Empire Petroleum Corp is currently generating about 0.01 per unit of risk. If you would invest  342.00  in PHX Minerals on August 30, 2024 and sell it today you would earn a total of  30.00  from holding PHX Minerals or generate 8.77% return on investment over 90 days.

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

PHX Minerals  vs.  Empire Petroleum Corp

PHX Minerals

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, PHX Minerals may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Empire Petroleum Corp

Risk-Adjusted Performance

0 of 100

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 relatively invariable basic indicators, Empire Petroleum is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PHX Minerals and Empire Petroleum

The main advantage of trading using opposite PHX Minerals and Empire Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHX Minerals 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 PHX Minerals 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.