Correlation Between Battalion Oil and MV Oil

Can any of the company-specific risk be diversified away by investing in both Battalion Oil and MV 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 Battalion Oil and MV Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Battalion Oil Corp and MV Oil Trust, you can compare the effects of market volatilities on Battalion Oil and MV 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 Battalion Oil with a short position of MV Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Battalion Oil and MV Oil.

Diversification Opportunities for Battalion Oil and MV Oil

0.51

Correlation Coefficient

Battalion Oil  MV Oil

Very weak diversification

The 3 months correlation between Battalion and MVO is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Battalion Oil Corp and MV Oil Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MV Oil Trust and Battalion Oil 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 Battalion Oil Corp are associated (or correlated) with MV Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MV Oil Trust has no effect on the direction of Battalion Oil i.e., Battalion Oil and MV Oil go up and down completely randomly.

Pair Corralation between Battalion Oil and MV Oil

Given the investment horizon of 90 days Battalion Oil Corp is expected to under-perform the MV Oil. In addition to that, Battalion Oil is 5.22 times more volatile than MV Oil Trust. It trades about -0.21 of its total potential returns per unit of risk. MV Oil Trust is currently generating about -0.03 per unit of volatility. If you would invest  891.00  in MV Oil Trust on September 13, 2024 and sell it today you would lose (19.00) from holding MV Oil Trust or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Battalion Oil Corp  vs.  MV Oil Trust

Battalion Oil Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Battalion Oil Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Battalion Oil disclosed solid returns over the last few months and may actually be approaching a breakup point.

MV Oil Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MV Oil Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MV Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Battalion Oil and MV Oil

The main advantage of trading using opposite Battalion Oil and MV Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Battalion Oil position performs unexpectedly, MV 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 MV Oil will offset losses from the drop in MV Oil's long position.

The idea behind Battalion Oil Corp and MV Oil Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.