Correlation Between Permian Resources and EnQuest PLC

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

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

Diversification Opportunities for Permian Resources and EnQuest PLC

-0.19

Correlation Coefficient

Permian Resources  EnQuest PLC

Good diversification

The 3 months correlation between Permian and EnQuest is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and EnQuest PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnQuest PLC 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 EnQuest PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnQuest PLC has no effect on the direction of Permian Resources i.e., Permian Resources and EnQuest PLC go up and down completely randomly.

Pair Corralation between Permian Resources and EnQuest PLC

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 0.55 times more return on investment than EnQuest PLC. However, Permian Resources is 1.81 times less risky than EnQuest PLC. It trades about 0.09 of its potential returns per unit of risk. EnQuest PLC is currently generating about -0.04 per unit of risk. If you would invest  1,336  in Permian Resources on September 13, 2024 and sell it today you would earn a total of  140.00  from holding Permian Resources or generate 10.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Permian Resources  vs.  EnQuest PLC

Permian Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Permian Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EnQuest PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnQuest PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Permian Resources and EnQuest PLC

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

The idea behind Permian Resources and EnQuest PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.