Correlation Between US Energy and Ovintiv
Can any of the company-specific risk be diversified away by investing in both US Energy and Ovintiv 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 US Energy and Ovintiv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Energy Corp and Ovintiv, you can compare the effects of market volatilities on US Energy and Ovintiv 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 US Energy with a short position of Ovintiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Ovintiv.
Diversification Opportunities for US Energy and Ovintiv
Poor diversification
The 3 months correlation between USEG and Ovintiv is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv and US 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 US Energy Corp are associated (or correlated) with Ovintiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovintiv has no effect on the direction of US Energy i.e., US Energy and Ovintiv go up and down completely randomly.
Pair Corralation between US Energy and Ovintiv
Given the investment horizon of 90 days US Energy Corp is expected to generate 2.01 times more return on investment than Ovintiv. However, US Energy is 2.01 times more volatile than Ovintiv. It trades about 0.25 of its potential returns per unit of risk. Ovintiv is currently generating about 0.22 per unit of risk. If you would invest 142.00 in US Energy Corp on September 4, 2024 and sell it today you would earn a total of 35.00 from holding US Energy Corp or generate 24.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Energy Corp vs. Ovintiv
Performance |
| Timeline |
| US Energy Corp |
| Ovintiv |
US Energy and Ovintiv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Energy and Ovintiv
The main advantage of trading using opposite US Energy and Ovintiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy position performs unexpectedly, Ovintiv 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 Ovintiv will offset losses from the drop in Ovintiv's long position.| US Energy vs. Evolution Petroleum | US Energy vs. Ring Energy | US Energy vs. Gran Tierra Energy | US Energy vs. PEDEVCO Corp |
| Ovintiv vs. Baytex Energy Corp | Ovintiv vs. Obsidian Energy | Ovintiv vs. Canadian Natural Resources | Ovintiv vs. Vermilion 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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