Correlation Between MV Oil and Pancontinental Oil

Can any of the company-specific risk be diversified away by investing in both MV Oil and Pancontinental 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 MV Oil and Pancontinental Oil 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 Pancontinental Oil Gas, you can compare the effects of market volatilities on MV Oil and Pancontinental 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 MV Oil with a short position of Pancontinental Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of MV Oil and Pancontinental Oil.

Diversification Opportunities for MV Oil and Pancontinental Oil

0.01

Correlation Coefficient

MV Oil  Pancontinental Oil

Significant diversification

The 3 months correlation between MVO and Pancontinental is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and Pancontinental Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pancontinental Oil Gas 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 Pancontinental Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pancontinental Oil Gas has no effect on the direction of MV Oil i.e., MV Oil and Pancontinental Oil go up and down completely randomly.

Pair Corralation between MV Oil and Pancontinental Oil

Considering the 90-day investment horizon MV Oil Trust is expected to generate 0.32 times more return on investment than Pancontinental Oil. However, MV Oil Trust is 3.16 times less risky than Pancontinental Oil. It trades about -0.09 of its potential returns per unit of risk. Pancontinental Oil Gas is currently generating about -0.03 per unit of risk. If you would invest  731.00  in MV Oil Trust on December 30, 2024 and sell it today you would lose (183.00) from holding MV Oil Trust or give up 25.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

MV Oil Trust  vs.  Pancontinental Oil Gas

MV Oil Trust

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pancontinental Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pancontinental Oil Gas 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 technical and fundamental 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 MV Oil and Pancontinental Oil

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

The idea behind MV Oil Trust and Pancontinental 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.