Correlation Between EGPI Firecreek and Shelf Drilling

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

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

Diversification Opportunities for EGPI Firecreek and Shelf Drilling

0.0

Correlation Coefficient

EGPI Firecreek  Shelf Drilling

Pay attention - limited upside

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

Pair Corralation between EGPI Firecreek and Shelf Drilling

Given the investment horizon of 90 days EGPI Firecreek is expected to generate 10.8 times more return on investment than Shelf Drilling. However, EGPI Firecreek is 10.8 times more volatile than Shelf Drilling. It trades about 0.04 of its potential returns per unit of risk. Shelf Drilling is currently generating about 0.03 per unit of risk. If you would invest  0.01  in EGPI Firecreek on February 12, 2024 and sell it today you would earn a total of  0.00  from holding EGPI Firecreek or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

EGPI Firecreek  vs.  Shelf Drilling

EGPI Firecreek

Risk-Adjusted Performance

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Very Weak

Over the last 90 days EGPI Firecreek has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, EGPI Firecreek is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelf Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EGPI Firecreek and Shelf Drilling

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

The idea behind EGPI Firecreek and Shelf Drilling 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .