Correlation Between Permian Resources and Delek

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

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

Diversification Opportunities for Permian Resources and Delek

0.77

Correlation Coefficient

Permian Resources  Delek

Poor diversification

The 3 months correlation between Permian and Delek is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Delek Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Group and Permian Resources 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 Resources are associated (or correlated) with Delek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Group has no effect on the direction of Permian Resources i.e., Permian Resources and Delek go up and down completely randomly.

Pair Corralation between Permian Resources and Delek

Allowing for the 90-day total investment horizon Permian Resources is expected to under-perform the Delek. In addition to that, Permian Resources is 1.15 times more volatile than Delek Group. It trades about -0.01 of its total potential returns per unit of risk. Delek Group is currently generating about 0.23 per unit of volatility. If you would invest  1,187  in Delek Group on September 16, 2024 and sell it today you would earn a total of  102.00  from holding Delek Group or generate 8.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Permian Resources  vs.  Delek Group

Permian Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Permian Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Delek Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Delek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permian Resources and Delek

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

The idea behind Permian Resources and Delek Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.