Correlation Between International Petroleum and MDM Permian
Can any of the company-specific risk be diversified away by investing in both International Petroleum and MDM Permian 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 International Petroleum and MDM Permian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Petroleum and MDM Permian, you can compare the effects of market volatilities on International Petroleum and MDM Permian 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 International Petroleum with a short position of MDM Permian. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Petroleum and MDM Permian.
Diversification Opportunities for International Petroleum and MDM Permian
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between International and MDM is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum and MDM Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDM Permian and International Petroleum 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 International Petroleum are associated (or correlated) with MDM Permian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDM Permian has no effect on the direction of International Petroleum i.e., International Petroleum and MDM Permian go up and down completely randomly.
Pair Corralation between International Petroleum and MDM Permian
Assuming the 90 days horizon International Petroleum is expected to under-perform the MDM Permian. But the pink sheet apears to be less risky and, when comparing its historical volatility, International Petroleum is 7.16 times less risky than MDM Permian. The pink sheet trades about -0.02 of its potential returns per unit of risk. The MDM Permian is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.00 in MDM Permian on September 3, 2024 and sell it today you would lose (0.10) from holding MDM Permian or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Petroleum vs. MDM Permian
Performance |
| Timeline |
| International Petroleum |
| MDM Permian |
International Petroleum and MDM Permian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Petroleum and MDM Permian
The main advantage of trading using opposite International Petroleum and MDM Permian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum position performs unexpectedly, MDM Permian 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 MDM Permian will offset losses from the drop in MDM Permian's long position.| International Petroleum vs. 1st NRG Corp | International Petroleum vs. Otto Energy Limited | International Petroleum vs. Razor Energy Corp | International Petroleum vs. Prospera Energy |
| MDM Permian vs. Saturn Oil Gas | MDM Permian vs. MMEX Resources Corp | MDM Permian vs. Razor Energy Corp | MDM Permian vs. San Leon Energy |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |