Correlation Between EOG Resources and Parsley Energy

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Can any of the company-specific risk be diversified away by investing in both EOG Resources and Parsley 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 EOG Resources and Parsley Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and Parsley Energy, you can compare the effects of market volatilities on EOG Resources and Parsley 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 EOG Resources with a short position of Parsley Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Parsley Energy.

Diversification Opportunities for EOG Resources and Parsley Energy

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between EOG and Parsley is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Parsley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsley Energy and EOG 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 EOG Resources are associated (or correlated) with Parsley Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parsley Energy has no effect on the direction of EOG Resources i.e., EOG Resources and Parsley Energy go up and down completely randomly.

Pair Corralation between EOG Resources and Parsley Energy

If you would invest  10,836  in EOG Resources on December 30, 2023 and sell it today you would earn a total of  1,948  from holding EOG Resources or generate 17.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

EOG Resources  vs.  Parsley Energy

 Performance 
       Timeline  
EOG Resources 

Risk-Adjusted Performance

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Modest
Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, EOG Resources may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Parsley Energy 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Parsley Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Parsley Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

EOG Resources and Parsley Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EOG Resources and Parsley Energy

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

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