Correlation Between MDM Permian and Invictus Energy

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

By analyzing existing cross correlation between MDM Permian and Invictus Energy Limited, you can compare the effects of market volatilities on MDM Permian and Invictus Energy 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 MDM Permian with a short position of Invictus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDM Permian and Invictus Energy.

Diversification Opportunities for MDM Permian and Invictus Energy

-0.24

Correlation Coefficient

MDM Permian  Invictus Energy

Very good diversification

The 3 months correlation between MDM and Invictus is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Invictus Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invictus Energy and MDM Permian 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 MDM Permian are associated (or correlated) with Invictus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invictus Energy has no effect on the direction of MDM Permian i.e., MDM Permian and Invictus Energy go up and down completely randomly.

Pair Corralation between MDM Permian and Invictus Energy

Given the investment horizon of 90 days MDM Permian is expected to generate 1.88 times more return on investment than Invictus Energy. However, MDM Permian is 1.88 times more volatile than Invictus Energy Limited. It trades about 0.06 of its potential returns per unit of risk. Invictus Energy Limited is currently generating about -0.03 per unit of risk. If you would invest  0.90  in MDM Permian on September 18, 2024 and sell it today you would lose (0.03) from holding MDM Permian or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

MDM Permian  vs.  Invictus Energy Limited

MDM Permian

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, MDM Permian reported solid returns over the last few months and may actually be approaching a breakup point.

Invictus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invictus Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MDM Permian and Invictus Energy

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

The idea behind MDM Permian and Invictus Energy Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.