Correlation Between Northern Oil and North European
Can any of the company-specific risk be diversified away by investing in both Northern Oil and North European 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 Northern Oil and North European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Oil Gas and North European Oil, you can compare the effects of market volatilities on Northern Oil and North European 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 Northern Oil with a short position of North European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Oil and North European.
Diversification Opportunities for Northern Oil and North European
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and North is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Northern Oil Gas and North European Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North European Oil and Northern Oil 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 Northern Oil Gas are associated (or correlated) with North European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North European Oil has no effect on the direction of Northern Oil i.e., Northern Oil and North European go up and down completely randomly.
Pair Corralation between Northern Oil and North European
Considering the 90-day investment horizon Northern Oil Gas is expected to generate 0.59 times more return on investment than North European. However, Northern Oil Gas is 1.71 times less risky than North European. It trades about 0.3 of its potential returns per unit of risk. North European Oil is currently generating about -0.18 per unit of risk. If you would invest 3,655 in Northern Oil Gas on August 27, 2024 and sell it today you would earn a total of 665.00 from holding Northern Oil Gas or generate 18.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Oil Gas vs. North European Oil
Performance |
| Timeline |
| Northern Oil Gas |
| North European Oil |
Northern Oil and North European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Oil and North European
The main advantage of trading using opposite Northern Oil and North European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Oil position performs unexpectedly, North European 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 North European will offset losses from the drop in North European's long position.| Northern Oil vs. Devon Energy | Northern Oil vs. ConocoPhillips | Northern Oil vs. Occidental Petroleum | Northern Oil vs. Permian Resources |
| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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