Correlation Between Vulcan Energy and PHX Energy

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

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

Diversification Opportunities for Vulcan Energy and PHX Energy

-0.28

Correlation Coefficient

Vulcan Energy  PHX Energy

Very good diversification

The 3 months correlation between Vulcan and PHX is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Energy Resources and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services and Vulcan 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 Vulcan Energy Resources are associated (or correlated) with PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Vulcan Energy i.e., Vulcan Energy and PHX Energy go up and down completely randomly.

Pair Corralation between Vulcan Energy and PHX Energy

Assuming the 90 days horizon Vulcan Energy is expected to generate 1.06 times less return on investment than PHX Energy. In addition to that, Vulcan Energy is 1.21 times more volatile than PHX Energy Services. It trades about 0.03 of its total potential returns per unit of risk. PHX Energy Services is currently generating about 0.03 per unit of volatility. If you would invest  562.00  in PHX Energy Services on September 26, 2024 and sell it today you would earn a total of  78.00  from holding PHX Energy Services or generate 13.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.93%
Values	Daily Returns

Vulcan Energy Resources  vs.  PHX Energy Services

Vulcan Energy Resources

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Energy reported solid returns over the last few months and may actually be approaching a breakup point.

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vulcan Energy and PHX Energy

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

The idea behind Vulcan Energy Resources and PHX Energy Services 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.