Correlation Between MDM Permian and Sintana Energy

Can any of the company-specific risk be diversified away by investing in both MDM Permian and Sintana 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 Sintana 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 Sintana Energy, you can compare the effects of market volatilities on MDM Permian and Sintana 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 Sintana Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDM Permian and Sintana Energy.

Diversification Opportunities for MDM Permian and Sintana Energy

-0.58

Correlation Coefficient

MDM Permian  Sintana Energy

Excellent diversification

The 3 months correlation between MDM and Sintana is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Sintana Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sintana 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 Sintana Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sintana Energy has no effect on the direction of MDM Permian i.e., MDM Permian and Sintana Energy go up and down completely randomly.

Pair Corralation between MDM Permian and Sintana Energy

Given the investment horizon of 90 days MDM Permian is expected to generate 1.96 times more return on investment than Sintana Energy. However, MDM Permian is 1.96 times more volatile than Sintana Energy. It trades about 0.12 of its potential returns per unit of risk. Sintana Energy is currently generating about -0.16 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  0.40  from holding MDM Permian or generate 57.14% return on investment over 90 days.

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

MDM Permian  vs.  Sintana Energy

MDM Permian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 9 (%) 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.

Sintana Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sintana Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 MDM Permian and Sintana Energy

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

The idea behind MDM Permian and Sintana Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.