Correlation Between North European and Northern Oil
Can any of the company-specific risk be diversified away by investing in both North European 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 North European and Northern Oil 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 Northern Oil Gas, you can compare the effects of market volatilities on North European 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 North European with a short position of Northern Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of North European and Northern Oil.
Diversification Opportunities for North European and Northern Oil
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and Northern is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil 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 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 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 North European i.e., North European and Northern Oil go up and down completely randomly.
Pair Corralation between North European and Northern Oil
Considering the 90-day investment horizon North European Oil is expected to under-perform the Northern Oil. In addition to that, North European is 1.71 times more volatile than Northern Oil Gas. It trades about -0.18 of its total potential returns per unit of risk. Northern Oil Gas is currently generating about 0.3 per unit of volatility. 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 |
North European Oil vs. Northern Oil Gas
Performance |
| Timeline |
| North European Oil |
| Northern Oil Gas |
North European and Northern Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North European and Northern Oil
The main advantage of trading using opposite North European and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North European 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.| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
| Northern Oil vs. Devon Energy | Northern Oil vs. ConocoPhillips | Northern Oil vs. Occidental Petroleum | Northern Oil vs. Permian Resources |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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