Correlation Between MDM Permian and Saturn Oil

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

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

Diversification Opportunities for MDM Permian and Saturn Oil

0.02

Correlation Coefficient

MDM Permian  Saturn Oil

Significant diversification

The 3 months correlation between MDM and Saturn is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Saturn Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saturn Oil Gas 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 Saturn Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saturn Oil Gas has no effect on the direction of MDM Permian i.e., MDM Permian and Saturn Oil go up and down completely randomly.

Pair Corralation between MDM Permian and Saturn Oil

Given the investment horizon of 90 days MDM Permian is expected to generate 4.1 times more return on investment than Saturn Oil. However, MDM Permian is 4.1 times more volatile than Saturn Oil Gas. It trades about 0.14 of its potential returns per unit of risk. Saturn Oil Gas is currently generating about -0.01 per unit of risk. If you would invest  0.70  in MDM Permian on December 27, 2024 and sell it today you would earn a total of  0.50  from holding MDM Permian or generate 71.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

MDM Permian  vs.  Saturn Oil Gas

MDM Permian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, MDM Permian reported solid returns over the last few months and may actually be approaching a breakup point.

Saturn Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saturn Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Saturn Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MDM Permian and Saturn Oil

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

The idea behind MDM Permian and Saturn 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 CEOs Directory module to screen CEOs from public companies around the world.