Correlation Between Permian Resources and Veren

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

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

Diversification Opportunities for Permian Resources and Veren

0.07

Correlation Coefficient

Permian Resources  Veren

Significant diversification

The 3 months correlation between Permian and Veren is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Veren Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veren Inc 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 Veren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veren Inc has no effect on the direction of Permian Resources i.e., Permian Resources and Veren go up and down completely randomly.

Pair Corralation between Permian Resources and Veren

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 7.8 times less return on investment than Veren. But when comparing it to its historical volatility, Permian Resources is 1.45 times less risky than Veren. It trades about 0.03 of its potential returns per unit of risk. Veren Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  490.00  in Veren Inc on December 27, 2024 and sell it today you would earn a total of  188.00  from holding Veren Inc or generate 38.37% 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.  Veren Inc

Permian Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 2 (%) 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.

Veren Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veren Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Veren displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permian Resources and Veren

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

The idea behind Permian Resources and Veren Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..