Correlation Between Cross Timbers and MV Oil

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

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

Diversification Opportunities for Cross Timbers and MV Oil

-0.49

Correlation Coefficient

Cross Timbers  MV Oil

Very good diversification

The 3 months correlation between Cross and MVO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty 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 Cross Timbers 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 Cross Timbers Royalty 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 Cross Timbers i.e., Cross Timbers and MV Oil go up and down completely randomly.

Pair Corralation between Cross Timbers and MV Oil

Considering the 90-day investment horizon Cross Timbers Royalty is expected to generate 1.19 times more return on investment than MV Oil. However, Cross Timbers is 1.19 times more volatile than MV Oil Trust. It trades about -0.01 of its potential returns per unit of risk. MV Oil Trust is currently generating about -0.04 per unit of risk. If you would invest  1,461  in Cross Timbers Royalty on November 19, 2024 and sell it today you would lose (386.00) from holding Cross Timbers Royalty or give up 26.42% of portfolio value over 90 days.

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

Cross Timbers Royalty  vs.  MV Oil Trust

Cross Timbers Royalty

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cross Timbers Royalty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cross Timbers may actually be approaching a critical reversion point that can send shares even higher in March 2025.

MV Oil Trust

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cross Timbers and MV Oil

The main advantage of trading using opposite Cross Timbers and MV Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cross Timbers 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 Cross Timbers Royalty 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.