Correlation Between Supernova Energy and EOG Resources

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

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

Diversification Opportunities for Supernova Energy and EOG Resources

-0.07

Correlation Coefficient

Supernova Energy  EOG Resources

Good diversification

The 3 months correlation between Supernova and EOG is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Supernova Energy and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources and Supernova Energy 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 Supernova Energy 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 Supernova Energy i.e., Supernova Energy and EOG Resources go up and down completely randomly.

Pair Corralation between Supernova Energy and EOG Resources

Given the investment horizon of 90 days Supernova Energy is expected to under-perform the EOG Resources. In addition to that, Supernova Energy is 6.99 times more volatile than EOG Resources. It trades about -0.05 of its total potential returns per unit of risk. EOG Resources is currently generating about -0.02 per unit of volatility. If you would invest  13,328  in EOG Resources on December 5, 2024 and sell it today you would lose (1,270) from holding EOG Resources or give up 9.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.13%
Values	Daily Returns

Supernova Energy  vs.  EOG Resources

Supernova Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Supernova Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

EOG Resources

Risk-Adjusted Performance

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 Supernova Energy and EOG Resources

The main advantage of trading using opposite Supernova Energy and EOG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Supernova Energy 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 Supernova Energy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.