Correlation Between Clearwater Paper and Evolution Petroleum

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Can any of the company-specific risk be diversified away by investing in both Clearwater Paper and Evolution Petroleum 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 Clearwater Paper and Evolution Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearwater Paper and Evolution Petroleum, you can compare the effects of market volatilities on Clearwater Paper and Evolution Petroleum 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 Clearwater Paper with a short position of Evolution Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Paper and Evolution Petroleum.

Diversification Opportunities for Clearwater Paper and Evolution Petroleum

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Clearwater and Evolution is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Paper and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Clearwater Paper 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 Clearwater Paper are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Clearwater Paper i.e., Clearwater Paper and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Clearwater Paper and Evolution Petroleum

Considering the 90-day investment horizon Clearwater Paper is expected to generate 3.86 times less return on investment than Evolution Petroleum. But when comparing it to its historical volatility, Clearwater Paper is 1.22 times less risky than Evolution Petroleum. It trades about 0.02 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Evolution Petroleum on September 10, 2022 and sell it today you would earn a total of  427.00  from holding Evolution Petroleum or generate 174.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Clearwater Paper  vs.  Evolution Petroleum

 Performance (%) 
       Timeline  
Clearwater Paper 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Clearwater Price Channel

Evolution Petroleum 
Evolution Performance
0 of 100
Over the last 90 days Evolution Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Evolution Petroleum is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Evolution Price Channel

Clearwater Paper and Evolution Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clearwater Paper and Evolution Petroleum

The main advantage of trading using opposite Clearwater Paper and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearwater Paper position performs unexpectedly, Evolution Petroleum 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 Evolution Petroleum will offset losses from the drop in Evolution Petroleum's long position.
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The idea behind Clearwater Paper and Evolution Petroleum 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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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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