Correlation Between Northern Oil and Crescent Energy

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

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

Diversification Opportunities for Northern Oil and Crescent Energy

0.96

Correlation Coefficient

Northern Oil  Crescent Energy

Almost no diversification

The 3 months correlation between Northern and Crescent is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Northern Oil Gas and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy and Northern 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 Northern Oil Gas are associated (or correlated) with Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of Northern Oil i.e., Northern Oil and Crescent Energy go up and down completely randomly.

Pair Corralation between Northern Oil and Crescent Energy

Considering the 90-day investment horizon Northern Oil Gas is expected to generate 1.01 times more return on investment than Crescent Energy. However, Northern Oil is 1.01 times more volatile than Crescent Energy Co. It trades about -0.11 of its potential returns per unit of risk. Crescent Energy Co is currently generating about -0.16 per unit of risk. If you would invest  3,605  in Northern Oil Gas on December 30, 2024 and sell it today you would lose (590.00) from holding Northern Oil Gas or give up 16.37% of portfolio value over 90 days.

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

Northern Oil Gas  vs.  Crescent Energy Co

Northern Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Crescent Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crescent Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Northern Oil and Crescent Energy

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

The idea behind Northern Oil Gas and Crescent Energy Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.