Correlation Between CKX Lands and Northern Oil

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

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

Diversification Opportunities for CKX Lands and Northern Oil

0.15

Correlation Coefficient

CKX Lands  Northern Oil

Average diversification

The 3 months correlation between CKX and Northern is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CKX Lands 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 CKX Lands 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 CKX Lands 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 CKX Lands i.e., CKX Lands and Northern Oil go up and down completely randomly.

Pair Corralation between CKX Lands and Northern Oil

Considering the 90-day investment horizon CKX Lands is expected to generate 0.79 times more return on investment than Northern Oil. However, CKX Lands is 1.27 times less risky than Northern Oil. It trades about -0.09 of its potential returns per unit of risk. Northern Oil Gas is currently generating about -0.11 per unit of risk. If you would invest  1,278  in CKX Lands on December 28, 2024 and sell it today you would lose (139.00) from holding CKX Lands or give up 10.88% of portfolio value over 90 days.

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

CKX Lands  vs.  Northern Oil Gas

CKX Lands

Risk-Adjusted Performance

Very Weak

Over the last 90 days CKX Lands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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 CKX Lands and Northern Oil

The main advantage of trading using opposite CKX Lands and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CKX Lands 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 CKX Lands 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .