Correlation Between Permian Resources and Saturn Oil

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

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

Diversification Opportunities for Permian Resources and Saturn Oil

0.89

Correlation Coefficient

Permian Resources  Saturn Oil

Very poor diversification

The 3 months correlation between Permian and Saturn is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Saturn Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saturn Oil Gas 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 Saturn Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saturn Oil Gas has no effect on the direction of Permian Resources i.e., Permian Resources and Saturn Oil go up and down completely randomly.

Pair Corralation between Permian Resources and Saturn Oil

Allowing for the 90-day total investment horizon Permian Resources is not expected to generate positive returns. However, Permian Resources is 1.06 times less risky than Saturn Oil. It waists most of its returns potential to compensate for thr risk taken. Saturn Oil is generating about -0.01 per unit of risk. If you would invest  1,398  in Permian Resources on December 28, 2024 and sell it today you would lose (23.00) from holding Permian Resources or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Permian Resources  vs.  Saturn Oil Gas

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Saturn Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saturn Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Saturn Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Permian Resources and Saturn Oil

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

The idea behind Permian Resources and Saturn Oil Gas 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.