Correlation Between Permian Resources and Ovintiv

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

By analyzing existing cross correlation between Permian Resources and Ovintiv, you can compare the effects of market volatilities on Permian Resources and Ovintiv 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 Permian Resources with a short position of Ovintiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Ovintiv.

Diversification Opportunities for Permian Resources and Ovintiv

0.71

Correlation Coefficient

Permian Resources  Ovintiv

Poor diversification

The 3 months correlation between Permian and Ovintiv is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv and Permian Resources 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 Permian Resources are associated (or correlated) with Ovintiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovintiv has no effect on the direction of Permian Resources i.e., Permian Resources and Ovintiv go up and down completely randomly.

Pair Corralation between Permian Resources and Ovintiv

Allowing for the 90-day total investment horizon Permian Resources is not expected to generate positive returns. However, Permian Resources is 1.09 times less risky than Ovintiv. It waists most of its returns potential to compensate for thr risk taken. Ovintiv is generating about 0.06 per unit of risk. If you would invest  3,948  in Ovintiv on December 28, 2024 and sell it today you would earn a total of  274.00  from holding Ovintiv or generate 6.94% return on investment over 90 days.

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

Permian Resources  vs.  Ovintiv

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ovintiv

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Permian Resources and Ovintiv

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

The idea behind Permian Resources and Ovintiv 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.