Correlation Between MDM Permian and Permian Resources
Can any of the company-specific risk be diversified away by investing in both MDM Permian and Permian Resources 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 Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MDM Permian and Permian Resources, you can compare the effects of market volatilities on MDM Permian and Permian Resources 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 Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDM Permian and Permian Resources.
Diversification Opportunities for MDM Permian and Permian Resources
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MDM and Permian is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources 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 Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of MDM Permian i.e., MDM Permian and Permian Resources go up and down completely randomly.
Pair Corralation between MDM Permian and Permian Resources
Given the investment horizon of 90 days MDM Permian is expected to generate 5.81 times more return on investment than Permian Resources. However, MDM Permian is 5.81 times more volatile than Permian Resources. It trades about 0.08 of its potential returns per unit of risk. Permian Resources is currently generating about 0.37 per unit of risk. If you would invest 1.00 in MDM Permian on August 28, 2024 and sell it today you would earn a total of 0.08 from holding MDM Permian or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MDM Permian vs. Permian Resources
Performance |
| Timeline |
| MDM Permian |
| Permian Resources |
MDM Permian and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MDM Permian and Permian Resources
The main advantage of trading using opposite MDM Permian and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDM Permian position performs unexpectedly, Permian Resources 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 Permian Resources will offset losses from the drop in Permian Resources' long position.| MDM Permian vs. Permian Resources | MDM Permian vs. Devon Energy | MDM Permian vs. EOG Resources | MDM Permian vs. Coterra Energy |
| Permian Resources vs. ConocoPhillips | Permian Resources vs. Occidental Petroleum | Permian Resources vs. EOG Resources | Permian Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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