Correlation Between Epsilon Energy and Permian Resources
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and Permian 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 Epsilon Energy and Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epsilon Energy and Permian Resources, you can compare the effects of market volatilities on Epsilon Energy and Permian 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 Epsilon Energy with a short position of Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and Permian Resources.
Diversification Opportunities for Epsilon Energy and Permian Resources
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Epsilon and Permian is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Epsilon 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 Epsilon Energy are associated (or correlated) with Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and Permian Resources go up and down completely randomly.
Pair Corralation between Epsilon Energy and Permian Resources
Given the investment horizon of 90 days Epsilon Energy is expected to under-perform the Permian Resources. In addition to that, Epsilon Energy is 1.49 times more volatile than Permian Resources. It trades about -0.05 of its total potential returns per unit of risk. Permian Resources is currently generating about 0.07 per unit of volatility. If you would invest 1,270 in Permian Resources on May 27, 2025 and sell it today you would earn a total of 106.00 from holding Permian Resources or generate 8.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Epsilon Energy vs. Permian Resources
Performance |
| Timeline |
| Epsilon Energy |
| Permian Resources |
Epsilon Energy and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and Permian Resources
The main advantage of trading using opposite Epsilon Energy and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, Permian 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 Permian Resources will offset losses from the drop in Permian Resources' long position.| Epsilon Energy vs. California Resources Corp | Epsilon Energy vs. Evolution Petroleum | Epsilon Energy vs. GeoPark | Epsilon Energy vs. Granite Ridge Resources |
| Permian Resources vs. Diamondback Energy | Permian Resources vs. Antero Resources Corp | Permian Resources vs. Vital Energy | Permian Resources vs. Magnolia Oil Gas |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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