Correlation Between EOG Resources and Rockdale Resources

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

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

Diversification Opportunities for EOG Resources and Rockdale Resources

0.66

Correlation Coefficient

EOG Resources  Rockdale Resources

Poor diversification

The 3 months correlation between EOG and Rockdale is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Rockdale Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockdale Resources Corp 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 Rockdale Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockdale Resources Corp has no effect on the direction of EOG Resources i.e., EOG Resources and Rockdale Resources go up and down completely randomly.

Pair Corralation between EOG Resources and Rockdale Resources

Considering the 90-day investment horizon EOG Resources is expected to under-perform the Rockdale Resources. But the stock apears to be less risky and, when comparing its historical volatility, EOG Resources is 6.53 times less risky than Rockdale Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Rockdale Resources Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Rockdale Resources Corp on February 7, 2024 and sell it today you would earn a total of  0.10  from holding Rockdale Resources Corp or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

EOG Resources  vs.  Rockdale Resources Corp

EOG Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, EOG Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Rockdale Resources Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rockdale Resources Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Rockdale Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EOG Resources and Rockdale Resources

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

The idea behind EOG Resources and Rockdale Resources Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.