Correlation Between Range Resources and Evolution Petroleum

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

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

Diversification Opportunities for Range Resources and Evolution Petroleum

0.83

Correlation Coefficient

Range Resources  Evolution Petroleum

Very poor diversification

The 3 months correlation between Range and Evolution is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Range Resources Corp and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Range 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 Range Resources Corp are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Range Resources i.e., Range Resources and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Range Resources and Evolution Petroleum

Considering the 90-day investment horizon Range Resources Corp is expected to generate 0.66 times more return on investment than Evolution Petroleum. However, Range Resources Corp is 1.52 times less risky than Evolution Petroleum. It trades about 0.19 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.12 per unit of risk. If you would invest  2,807  in Range Resources Corp on September 4, 2024 and sell it today you would earn a total of  684.00  from holding Range Resources Corp or generate 24.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Range Resources Corp  vs.  Evolution Petroleum

Range Resources Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Range Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Evolution Petroleum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Evolution Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Range Resources and Evolution Petroleum

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

The idea behind Range Resources Corp and Evolution Petroleum 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.