Correlation Between Earthstone Energy and Antero Resources

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

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

Diversification Opportunities for Earthstone Energy and Antero Resources

0.82

Correlation Coefficient

Earthstone Energy  Antero Resources

Very poor diversification

The 3 months correlation between Earthstone and Antero is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and Antero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Resources Corp and Earthstone 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 Earthstone Energy are associated (or correlated) with Antero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Resources Corp has no effect on the direction of Earthstone Energy i.e., Earthstone Energy and Antero Resources go up and down completely randomly.

Pair Corralation between Earthstone Energy and Antero Resources

If you would invest  2,997  in Antero Resources Corp on February 7, 2024 and sell it today you would earn a total of  317.00  from holding Antero Resources Corp or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.55%
Values	Daily Returns

Earthstone Energy  vs.  Antero Resources Corp

Earthstone Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Antero Resources Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Antero Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Earthstone Energy and Antero Resources

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

The idea behind Earthstone Energy and Antero 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.