Correlation Between North European and VOC Energy

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

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

Diversification Opportunities for North European and VOC Energy

-0.44

Correlation Coefficient

North European  VOC Energy

Very good diversification

The 3 months correlation between North and VOC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil and VOC Energy Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOC Energy Trust and North European 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 North European Oil are associated (or correlated) with VOC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOC Energy Trust has no effect on the direction of North European i.e., North European and VOC Energy go up and down completely randomly.

Pair Corralation between North European and VOC Energy

Considering the 90-day investment horizon North European Oil is expected to generate 0.94 times more return on investment than VOC Energy. However, North European Oil is 1.06 times less risky than VOC Energy. It trades about 0.07 of its potential returns per unit of risk. VOC Energy Trust is currently generating about -0.18 per unit of risk. If you would invest  408.00  in North European Oil on November 29, 2024 and sell it today you would earn a total of  46.00  from holding North European Oil or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

North European Oil  vs.  VOC Energy Trust

North European Oil

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in North European Oil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, North European unveiled solid returns over the last few months and may actually be approaching a breakup point.

VOC Energy Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days VOC Energy Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with North European and VOC Energy

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

The idea behind North European Oil and VOC Energy Trust 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.