Correlation Between SDX Energy and MDM Permian
Can any of the company-specific risk be diversified away by investing in both SDX Energy and MDM Permian 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 SDX Energy and MDM Permian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SDX Energy plc and MDM Permian, you can compare the effects of market volatilities on SDX Energy and MDM Permian 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 SDX Energy with a short position of MDM Permian. Check out your portfolio center. Please also check ongoing floating volatility patterns of SDX Energy and MDM Permian.
Diversification Opportunities for SDX Energy and MDM Permian
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SDX and MDM is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SDX Energy plc and MDM Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDM Permian and SDX 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 SDX Energy plc are associated (or correlated) with MDM Permian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDM Permian has no effect on the direction of SDX Energy i.e., SDX Energy and MDM Permian go up and down completely randomly.
Pair Corralation between SDX Energy and MDM Permian
Assuming the 90 days horizon SDX Energy plc is expected to generate 10.37 times more return on investment than MDM Permian. However, SDX Energy is 10.37 times more volatile than MDM Permian. It trades about 0.21 of its potential returns per unit of risk. MDM Permian is currently generating about -0.01 per unit of risk. If you would invest 0.29 in SDX Energy plc on December 1, 2024 and sell it today you would earn a total of 1.13 from holding SDX Energy plc or generate 389.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SDX Energy plc vs. MDM Permian
Performance |
| Timeline |
| SDX Energy plc |
| MDM Permian |
SDX Energy and MDM Permian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SDX Energy and MDM Permian
The main advantage of trading using opposite SDX Energy and MDM Permian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDX Energy position performs unexpectedly, MDM Permian 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 MDM Permian will offset losses from the drop in MDM Permian's long position.| SDX Energy vs. 1st NRG Corp | SDX Energy vs. Petro Viking Energy | SDX Energy vs. Otto Energy Limited | SDX Energy vs. Empire Petroleum Corp |
| MDM Permian vs. Saturn Oil Gas | MDM Permian vs. MMEX Resources Corp | MDM Permian vs. Razor Energy Corp | MDM Permian vs. San Leon 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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