Correlation Between Permian Basin and North European
Can any of the company-specific risk be diversified away by investing in both Permian Basin 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 Permian Basin and North European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Basin Royalty and North European Oil, you can compare the effects of market volatilities on Permian Basin 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 Permian Basin with a short position of North European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Basin and North European.
Diversification Opportunities for Permian Basin and North European
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Permian and North is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Permian Basin Royalty 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 Permian Basin 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 Permian Basin Royalty 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 Permian Basin i.e., Permian Basin and North European go up and down completely randomly.
Pair Corralation between Permian Basin and North European
Considering the 90-day investment horizon Permian Basin Royalty is expected to generate 0.67 times more return on investment than North European. However, Permian Basin Royalty is 1.49 times less risky than North European. It trades about 0.17 of its potential returns per unit of risk. North European Oil is currently generating about -0.22 per unit of risk. If you would invest 1,156 in Permian Basin Royalty on August 28, 2024 and sell it today you would earn a total of 127.00 from holding Permian Basin Royalty or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Basin Royalty vs. North European Oil
Performance |
| Timeline |
| Permian Basin Royalty |
| North European Oil |
Permian Basin and North European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Basin and North European
The main advantage of trading using opposite Permian Basin and North European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Basin 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.| Permian Basin vs. Dorian LPG | Permian Basin vs. Frontline | Permian Basin vs. Torm PLC Class | Permian Basin vs. Plains All American |
| North European vs. ConocoPhillips | North European vs. Occidental Petroleum | North European vs. Permian Resources | North European vs. EOG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |