Correlation Between Ring Energy and Northern Oil
Can any of the company-specific risk be diversified away by investing in both Ring 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 Ring 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 Ring Energy and Northern Oil Gas, you can compare the effects of market volatilities on Ring 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 Ring Energy with a short position of Northern Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ring Energy and Northern Oil.
Diversification Opportunities for Ring Energy and Northern Oil
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ring and Northern is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ring 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 Ring 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 Ring 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 Ring Energy i.e., Ring Energy and Northern Oil go up and down completely randomly.
Pair Corralation between Ring Energy and Northern Oil
Considering the 90-day investment horizon Ring Energy is expected to under-perform the Northern Oil. In addition to that, Ring Energy is 1.49 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 0.05 per unit of volatility. If you would invest 2,971 in Northern Oil Gas on August 28, 2024 and sell it today you would earn a total of 1,360 from holding Northern Oil Gas or generate 45.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ring Energy vs. Northern Oil Gas
Performance |
| Timeline |
| Ring Energy |
| Northern Oil Gas |
Ring Energy and Northern Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ring Energy and Northern Oil
The main advantage of trading using opposite Ring Energy and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ring 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.| Ring Energy vs. Vital Energy | Ring Energy vs. Permian Resources | Ring Energy vs. Magnolia Oil Gas | Ring Energy vs. SM Energy Co |
| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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