Correlation Between PHX Energy and Source Rock

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

By analyzing existing cross correlation between PHX Energy Services and Source Rock Royalties, you can compare the effects of market volatilities on PHX Energy and Source Rock 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 PHX Energy with a short position of Source Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHX Energy and Source Rock.

Diversification Opportunities for PHX Energy and Source Rock

0.67

Correlation Coefficient

PHX Energy  Source Rock

Poor diversification

The 3 months correlation between PHX and Source is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and Source Rock Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Rock Royalties and PHX 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 PHX Energy Services are associated (or correlated) with Source Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Rock Royalties has no effect on the direction of PHX Energy i.e., PHX Energy and Source Rock go up and down completely randomly.

Pair Corralation between PHX Energy and Source Rock

Assuming the 90 days trading horizon PHX Energy Services is expected to generate 1.09 times more return on investment than Source Rock. However, PHX Energy is 1.09 times more volatile than Source Rock Royalties. It trades about 0.12 of its potential returns per unit of risk. Source Rock Royalties is currently generating about 0.06 per unit of risk. If you would invest  741.00  in PHX Energy Services on April 20, 2025 and sell it today you would earn a total of  89.00  from holding PHX Energy Services or generate 12.01% return on investment over 90 days.

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

PHX Energy Services  vs.  Source Rock Royalties

PHX Energy Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Energy Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PHX Energy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Source Rock Royalties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Source Rock Royalties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Source Rock is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PHX Energy and Source Rock

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

The idea behind PHX Energy Services and Source Rock Royalties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.