Correlation Between MV Oil and PrimeEnergy

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

Diversification Opportunities for MV Oil and PrimeEnergy

0.22

Correlation Coefficient

MV Oil  PrimeEnergy

Modest diversification

The 3 months correlation between MVO and PrimeEnergy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy 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 PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of MV Oil i.e., MV Oil and PrimeEnergy go up and down completely randomly.

Pair Corralation between MV Oil and PrimeEnergy

Considering the 90-day investment horizon MV Oil Trust is expected to under-perform the PrimeEnergy. In addition to that, MV Oil is 1.43 times more volatile than PrimeEnergy. It trades about -0.07 of its total potential returns per unit of risk. PrimeEnergy is currently generating about 0.0 per unit of volatility. If you would invest  22,389  in PrimeEnergy on December 28, 2024 and sell it today you would lose (622.00) from holding PrimeEnergy or give up 2.78% of portfolio value over 90 days.

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

MV Oil Trust  vs.  PrimeEnergy

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.

PrimeEnergy

Risk-Adjusted Performance

Weak

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

Pair Trading with MV Oil and PrimeEnergy

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

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