Correlation Between Permian Resources and NACCO Industries

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

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

Diversification Opportunities for Permian Resources and NACCO Industries

-0.35

Correlation Coefficient

Permian Resources  NACCO Industries

Very good diversification

The 3 months correlation between Permian and NACCO is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and NACCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NACCO Industries and Permian 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 Permian Resources are associated (or correlated) with NACCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NACCO Industries has no effect on the direction of Permian Resources i.e., Permian Resources and NACCO Industries go up and down completely randomly.

Pair Corralation between Permian Resources and NACCO Industries

Allowing for the 90-day total investment horizon Permian Resources is expected to under-perform the NACCO Industries. In addition to that, Permian Resources is 2.15 times more volatile than NACCO Industries. It trades about -0.14 of its total potential returns per unit of risk. NACCO Industries is currently generating about 0.02 per unit of volatility. If you would invest  3,078  in NACCO Industries on January 8, 2025 and sell it today you would earn a total of  42.00  from holding NACCO Industries or generate 1.36% return on investment over 90 days.

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

Permian Resources  vs.  NACCO Industries

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NACCO Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NACCO Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, NACCO Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Permian Resources and NACCO Industries

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

The idea behind Permian Resources and NACCO Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.