Correlation Between Riley Exploration and PHX Minerals

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

By analyzing existing cross correlation between Riley Exploration Permian and PHX Minerals, you can compare the effects of market volatilities on Riley Exploration and PHX Minerals 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 Riley Exploration with a short position of PHX Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Riley Exploration and PHX Minerals.

Diversification Opportunities for Riley Exploration and PHX Minerals

0.49

Correlation Coefficient

Riley Exploration  PHX Minerals

Very weak diversification

The 3 months correlation between Riley and PHX is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Riley Exploration Permian and PHX Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Minerals and Riley Exploration 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 Riley Exploration Permian are associated (or correlated) with PHX Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Minerals has no effect on the direction of Riley Exploration i.e., Riley Exploration and PHX Minerals go up and down completely randomly.

Pair Corralation between Riley Exploration and PHX Minerals

Given the investment horizon of 90 days Riley Exploration Permian is expected to under-perform the PHX Minerals. In addition to that, Riley Exploration is 1.35 times more volatile than PHX Minerals. It trades about 0.0 of its total potential returns per unit of risk. PHX Minerals is currently generating about 0.07 per unit of volatility. If you would invest  381.00  in PHX Minerals on December 26, 2024 and sell it today you would earn a total of  26.00  from holding PHX Minerals or generate 6.82% return on investment over 90 days.

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

Riley Exploration Permian  vs.  PHX Minerals

Riley Exploration Permian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Riley Exploration Permian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Riley Exploration is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PHX Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, PHX Minerals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Riley Exploration and PHX Minerals

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

The idea behind Riley Exploration Permian and PHX Minerals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.