Correlation Between Permian Resources and Mach Natural

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

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

Diversification Opportunities for Permian Resources and Mach Natural

0.8

Correlation Coefficient

Permian Resources  Mach Natural

Very poor diversification

The 3 months correlation between Permian and Mach is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Mach Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mach Natural Resources 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 Mach Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mach Natural Resources has no effect on the direction of Permian Resources i.e., Permian Resources and Mach Natural go up and down completely randomly.

Pair Corralation between Permian Resources and Mach Natural

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 1.28 times more return on investment than Mach Natural. However, Permian Resources is 1.28 times more volatile than Mach Natural Resources. It trades about 0.02 of its potential returns per unit of risk. Mach Natural Resources is currently generating about 0.01 per unit of risk. If you would invest  1,337  in Permian Resources on December 19, 2024 and sell it today you would earn a total of  19.00  from holding Permian Resources or generate 1.42% return on investment over 90 days.

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

Permian Resources  vs.  Mach Natural Resources

Permian Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Mach Natural Resources

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Permian Resources and Mach Natural Resources 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.