Correlation Between PrimeEnergy and Foothills Exploration

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

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

Diversification Opportunities for PrimeEnergy and Foothills Exploration

0.0

Correlation Coefficient

PrimeEnergy  Foothills Exploration

Pay attention - limited upside

The 3 months correlation between PrimeEnergy and Foothills is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and Foothills Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foothills Exploration and PrimeEnergy 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 PrimeEnergy are associated (or correlated) with Foothills Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foothills Exploration has no effect on the direction of PrimeEnergy i.e., PrimeEnergy and Foothills Exploration go up and down completely randomly.

Pair Corralation between PrimeEnergy and Foothills Exploration

If you would invest  0.01  in Foothills Exploration on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Foothills Exploration or generate 0.0% return on investment over 90 days.

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

PrimeEnergy  vs.  Foothills Exploration

PrimeEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PrimeEnergy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Foothills Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration 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 PrimeEnergy and Foothills Exploration

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

The idea behind PrimeEnergy and Foothills Exploration 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.