Correlation Between PTT Exploration and EOG Resources

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

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

Diversification Opportunities for PTT Exploration and EOG Resources

-0.6

Correlation Coefficient

PTT Exploration  EOG Resources

Excellent diversification

The 3 months correlation between PTT and EOG is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PTT Exploration Production and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources and PTT Exploration 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 PTT Exploration Production are associated (or correlated) with EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of PTT Exploration i.e., PTT Exploration and EOG Resources go up and down completely randomly.

Pair Corralation between PTT Exploration and EOG Resources

Assuming the 90 days horizon PTT Exploration Production is expected to generate 6.81 times more return on investment than EOG Resources. However, PTT Exploration is 6.81 times more volatile than EOG Resources. It trades about 0.06 of its potential returns per unit of risk. EOG Resources is currently generating about 0.03 per unit of risk. If you would invest  789.00  in PTT Exploration Production on January 20, 2024 and sell it today you would earn a total of  367.00  from holding PTT Exploration Production or generate 46.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.94%
Values	Daily Returns

PTT Exploration Production  vs.  EOG Resources

PTT Exploration Prod

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTT Exploration Production has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

EOG Resources

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EOG Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PTT Exploration and EOG Resources

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

The idea behind PTT Exploration Production and EOG Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.