Correlation Between Permianville Royalty and EQT

Can any of the company-specific risk be diversified away by investing in both Permianville Royalty and EQT 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 EQT 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 EQT Corporation, you can compare the effects of market volatilities on Permianville Royalty and EQT 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 EQT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permianville Royalty and EQT.

Diversification Opportunities for Permianville Royalty and EQT

-0.43

Correlation Coefficient

Permianville Royalty  EQT

Very good diversification

The 3 months correlation between Permianville and EQT is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation 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 EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and EQT go up and down completely randomly.

Pair Corralation between Permianville Royalty and EQT

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the EQT. But the stock apears to be less risky and, when comparing its historical volatility, Permianville Royalty Trust is 1.06 times less risky than EQT. The stock trades about -0.37 of its potential returns per unit of risk. The EQT Corporation is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,599  in EQT Corporation on September 25, 2024 and sell it today you would lose (141.00) from holding EQT Corporation or give up 3.07% of portfolio value over 90 days.

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

Permianville Royalty Trust  vs.  EQT Corp.

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.

EQT Corporation

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Permianville Royalty and EQT

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

The idea behind Permianville Royalty Trust and EQT Corporation 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.