Correlation Between Mexco Energy and Northern Oil
Can any of the company-specific risk be diversified away by investing in both Mexco Energy and Northern Oil 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 Mexco Energy and Northern Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mexco Energy and Northern Oil Gas, you can compare the effects of market volatilities on Mexco Energy and Northern Oil 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 Mexco Energy with a short position of Northern Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mexco Energy and Northern Oil.
Diversification Opportunities for Mexco Energy and Northern Oil
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mexco and Northern is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mexco Energy and Northern Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Oil Gas and Mexco 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 Mexco Energy are associated (or correlated) with Northern Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Oil Gas has no effect on the direction of Mexco Energy i.e., Mexco Energy and Northern Oil go up and down completely randomly.
Pair Corralation between Mexco Energy and Northern Oil
Considering the 90-day investment horizon Mexco Energy is expected to generate 2.07 times less return on investment than Northern Oil. In addition to that, Mexco Energy is 1.51 times more volatile than Northern Oil Gas. It trades about 0.01 of its total potential returns per unit of risk. Northern Oil Gas is currently generating about 0.04 per unit of volatility. If you would invest 3,115 in Northern Oil Gas on August 24, 2024 and sell it today you would earn a total of 1,205 from holding Northern Oil Gas or generate 38.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Mexco Energy vs. Northern Oil Gas
Performance |
| Timeline |
| Mexco Energy |
| Northern Oil Gas |
Mexco Energy and Northern Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mexco Energy and Northern Oil
The main advantage of trading using opposite Mexco Energy and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mexco Energy position performs unexpectedly, Northern Oil 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 Northern Oil will offset losses from the drop in Northern Oil's long position.| Mexco Energy vs. PHX Minerals | Mexco Energy vs. Granite Ridge Resources | Mexco Energy vs. XXL Energy Corp | Mexco Energy vs. Permianville Royalty Trust |
| Northern Oil vs. Houston American Energy | Northern Oil vs. Mexco Energy | Northern Oil vs. Ring Energy | Northern Oil vs. Permianville Royalty Trust |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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