Correlation Between MV Oil and Capricorn Energy

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

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

Diversification Opportunities for MV Oil and Capricorn Energy

-0.11

Correlation Coefficient

MV Oil  Capricorn Energy

Good diversification

The 3 months correlation between MVO and Capricorn is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy PLC and MV Oil 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 MV Oil Trust are associated (or correlated) with Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of MV Oil i.e., MV Oil and Capricorn Energy go up and down completely randomly.

Pair Corralation between MV Oil and Capricorn Energy

Considering the 90-day investment horizon MV Oil Trust is expected to under-perform the Capricorn Energy. But the stock apears to be less risky and, when comparing its historical volatility, MV Oil Trust is 2.19 times less risky than Capricorn Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Capricorn Energy PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  274.00  in Capricorn Energy PLC on September 4, 2024 and sell it today you would earn a total of  332.00  from holding Capricorn Energy PLC or generate 121.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.55%
Values	Daily Returns

MV Oil Trust  vs.  Capricorn Energy PLC

MV Oil Trust

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, MV Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Capricorn Energy PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capricorn Energy PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Capricorn Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MV Oil and Capricorn Energy

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

The idea behind MV Oil Trust and Capricorn Energy PLC 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.