Correlation Between Berry Petroleum and Northern Oil

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

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

Diversification Opportunities for Berry Petroleum and Northern Oil

0.93

Correlation Coefficient

Berry Petroleum  Northern Oil

Almost no diversification

The 3 months correlation between Berry and Northern is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Berry Petroleum Corp 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 Berry Petroleum 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 Berry Petroleum Corp 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 Berry Petroleum i.e., Berry Petroleum and Northern Oil go up and down completely randomly.

Pair Corralation between Berry Petroleum and Northern Oil

Considering the 90-day investment horizon Berry Petroleum Corp is expected to under-perform the Northern Oil. In addition to that, Berry Petroleum is 1.33 times more volatile than Northern Oil Gas. It trades about -0.11 of its total potential returns per unit of risk. Northern Oil Gas is currently generating about -0.11 per unit of volatility. If you would invest  3,605  in Northern Oil Gas on December 28, 2024 and sell it today you would lose (590.00) from holding Northern Oil Gas or give up 16.37% of portfolio value over 90 days.

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

Berry Petroleum Corp  vs.  Northern Oil Gas

Berry Petroleum Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berry Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Northern Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Berry Petroleum and Northern Oil

The main advantage of trading using opposite Berry Petroleum and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berry Petroleum 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.

The idea behind Berry Petroleum Corp and Northern Oil Gas 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.