Correlation Between Permian Resources and PetroTal Corp

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

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

Diversification Opportunities for Permian Resources and PetroTal Corp

0.36

Correlation Coefficient

Permian Resources  PetroTal Corp

Weak diversification

The 3 months correlation between Permian and PetroTal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and PetroTal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroTal Corp 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 PetroTal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroTal Corp has no effect on the direction of Permian Resources i.e., Permian Resources and PetroTal Corp go up and down completely randomly.

Pair Corralation between Permian Resources and PetroTal Corp

Allowing for the 90-day total investment horizon Permian Resources is not expected to generate positive returns. However, Permian Resources is 1.1 times less risky than PetroTal Corp. It waists most of its returns potential to compensate for thr risk taken. PetroTal Corp is generating about 0.15 per unit of risk. If you would invest  39.00  in PetroTal Corp on December 29, 2024 and sell it today you would earn a total of  9.00  from holding PetroTal Corp or generate 23.08% return on investment over 90 days.

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

Permian Resources  vs.  PetroTal Corp

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.

PetroTal Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PetroTal Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, PetroTal Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permian Resources and PetroTal Corp

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

The idea behind Permian Resources and PetroTal Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.