Correlation Between MMEX Resources and MDM Permian

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

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

Diversification Opportunities for MMEX Resources and MDM Permian

0.02

Correlation Coefficient

MMEX Resources  MDM Permian

Significant diversification

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

Pair Corralation between MMEX Resources and MDM Permian

Given the investment horizon of 90 days MMEX Resources Corp is expected to generate 26.94 times more return on investment than MDM Permian. However, MMEX Resources is 26.94 times more volatile than MDM Permian. It trades about 0.31 of its potential returns per unit of risk. MDM Permian is currently generating about 0.05 per unit of risk. If you would invest  0.01  in MMEX Resources Corp on September 4, 2024 and sell it today you would earn a total of  0.00  from holding MMEX Resources Corp or generate 0.0% return on investment over 90 days.

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

MMEX Resources Corp  vs.  MDM Permian

MMEX Resources Corp

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MMEX Resources Corp are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, MMEX Resources showed solid returns over the last few months and may actually be approaching a breakup point.

MDM Permian

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 3 (%) 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.

Pair Trading with MMEX Resources and MDM Permian

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

The idea behind MMEX Resources Corp and MDM Permian 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 Global Correlations module to find global opportunities by holding instruments from different markets.