Correlation Between MDM Permian and Century Petroleum
Can any of the company-specific risk be diversified away by investing in both MDM Permian and Century 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 MDM Permian and Century Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MDM Permian and Century Petroleum Corp, you can compare the effects of market volatilities on MDM Permian and Century 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 MDM Permian with a short position of Century Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDM Permian and Century Petroleum.
Diversification Opportunities for MDM Permian and Century Petroleum
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MDM and Century is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Century Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Petroleum Corp and MDM Permian 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 MDM Permian are associated (or correlated) with Century Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Petroleum Corp has no effect on the direction of MDM Permian i.e., MDM Permian and Century Petroleum go up and down completely randomly.
Pair Corralation between MDM Permian and Century Petroleum
Given the investment horizon of 90 days MDM Permian is expected to generate 2.76 times more return on investment than Century Petroleum. However, MDM Permian is 2.76 times more volatile than Century Petroleum Corp. It trades about 0.05 of its potential returns per unit of risk. Century Petroleum Corp is currently generating about -0.05 per unit of risk. If you would invest 2.20 in MDM Permian on August 31, 2024 and sell it today you would lose (1.10) from holding MDM Permian or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.75% |
| Values | Daily Returns |
MDM Permian vs. Century Petroleum Corp
Performance |
| Timeline |
| MDM Permian |
| Century Petroleum Corp |
MDM Permian and Century Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MDM Permian and Century Petroleum
The main advantage of trading using opposite MDM Permian and Century Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDM Permian position performs unexpectedly, Century 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 Century Petroleum will offset losses from the drop in Century Petroleum's long position.| MDM Permian vs. Permian Resources | MDM Permian vs. Devon Energy | MDM Permian vs. EOG Resources | MDM Permian vs. Coterra 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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