Correlation Between Houston American and Ovintiv

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

Diversification Opportunities for Houston American and Ovintiv

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Houston and Ovintiv is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Houston American Energy and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv and Houston American 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 Houston American Energy are associated (or correlated) with Ovintiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovintiv has no effect on the direction of Houston American i.e., Houston American and Ovintiv go up and down completely randomly.

Pair Corralation between Houston American and Ovintiv

Given the investment horizon of 90 days Houston American Energy is expected to generate 10.26 times more return on investment than Ovintiv. However, Houston American is 10.26 times more volatile than Ovintiv. It trades about 0.22 of its potential returns per unit of risk. Ovintiv is currently generating about 0.71 per unit of risk. If you would invest  124.00  in Houston American Energy on October 25, 2024 and sell it today you would earn a total of  60.00  from holding Houston American Energy or generate 48.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Houston American Energy  vs.  Ovintiv

 Performance 
       Timeline  
Houston American Energy 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Houston American Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Houston American sustained solid returns over the last few months and may actually be approaching a breakup point.
Ovintiv 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ovintiv showed solid returns over the last few months and may actually be approaching a breakup point.

Houston American and Ovintiv Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Houston American and Ovintiv

The main advantage of trading using opposite Houston American and Ovintiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Houston American position performs unexpectedly, Ovintiv 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 Ovintiv will offset losses from the drop in Ovintiv's long position.
The idea behind Houston American Energy and Ovintiv 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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