Correlation Between Permian Resources and Pieridae Energy

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

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

Diversification Opportunities for Permian Resources and Pieridae Energy

0.13

Correlation Coefficient

Permian Resources  Pieridae Energy

Average diversification

The 3 months correlation between Permian and Pieridae is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Pieridae Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pieridae Energy 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 Pieridae Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pieridae Energy has no effect on the direction of Permian Resources i.e., Permian Resources and Pieridae Energy go up and down completely randomly.

Pair Corralation between Permian Resources and Pieridae Energy

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 27.27 times less return on investment than Pieridae Energy. But when comparing it to its historical volatility, Permian Resources is 2.0 times less risky than Pieridae Energy. It trades about 0.01 of its potential returns per unit of risk. Pieridae Energy Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Pieridae Energy Limited on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Pieridae Energy Limited or generate 38.89% return on investment over 90 days.

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

Permian Resources  vs.  Pieridae Energy Limited

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.

Pieridae Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pieridae Energy Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pieridae Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permian Resources and Pieridae Energy

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

The idea behind Permian Resources and Pieridae Energy Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.