Correlation Between North European and Gulf Coast
Can any of the company-specific risk be diversified away by investing in both North European and Gulf Coast 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 North European and Gulf Coast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North European Oil and Gulf Coast, you can compare the effects of market volatilities on North European and Gulf Coast 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 North European with a short position of Gulf Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of North European and Gulf Coast.
Diversification Opportunities for North European and Gulf Coast
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and Gulf is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil and Gulf Coast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Coast and North European 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 North European Oil are associated (or correlated) with Gulf Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Coast has no effect on the direction of North European i.e., North European and Gulf Coast go up and down completely randomly.
Pair Corralation between North European and Gulf Coast
Considering the 90-day investment horizon North European Oil is expected to under-perform the Gulf Coast. In addition to that, North European is 1.19 times more volatile than Gulf Coast. It trades about -0.22 of its total potential returns per unit of risk. Gulf Coast is currently generating about 0.63 per unit of volatility. If you would invest 1.20 in Gulf Coast on August 28, 2024 and sell it today you would earn a total of 0.79 from holding Gulf Coast or generate 65.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North European Oil vs. Gulf Coast
Performance |
| Timeline |
| North European Oil |
| Gulf Coast |
North European and Gulf Coast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North European and Gulf Coast
The main advantage of trading using opposite North European and Gulf Coast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North European position performs unexpectedly, Gulf Coast 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 Gulf Coast will offset losses from the drop in Gulf Coast's long position.| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
| Gulf Coast vs. Permian Resources | Gulf Coast vs. Devon Energy | Gulf Coast vs. EOG Resources | Gulf Coast 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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