Correlation Between Permianville Royalty and EOG Resources

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

By analyzing existing cross correlation between Permianville Royalty Trust and EOG Resources, you can compare the effects of market volatilities on Permianville Royalty and EOG Resources 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 Permianville Royalty with a short position of EOG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permianville Royalty and EOG Resources.

Diversification Opportunities for Permianville Royalty and EOG Resources

0.38

Correlation Coefficient

Permianville Royalty  EOG Resources

Weak diversification

The 3 months correlation between Permianville and EOG is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources and Permianville Royalty 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 Permianville Royalty Trust are associated (or correlated) with EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and EOG Resources go up and down completely randomly.

Pair Corralation between Permianville Royalty and EOG Resources

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the EOG Resources. In addition to that, Permianville Royalty is 1.7 times more volatile than EOG Resources. It trades about -0.37 of its total potential returns per unit of risk. EOG Resources is currently generating about -0.39 per unit of volatility. If you would invest  13,198  in EOG Resources on September 25, 2024 and sell it today you would lose (1,115) from holding EOG Resources or give up 8.45% of portfolio value over 90 days.

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

Permianville Royalty Trust  vs.  EOG Resources

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

EOG Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Permianville Royalty and EOG Resources

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

The idea behind Permianville Royalty Trust and EOG 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..