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

0.79

Correlation Coefficient

Permian Resources  Ovintiv

Poor diversification

The 3 months correlation between Permian and Ovintiv is 0.79. 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 expected to under-perform the Ovintiv. But the stock apears to be less risky and, when comparing its historical volatility, Permian Resources is 1.1 times less risky than Ovintiv. The stock trades about -0.09 of its potential returns per unit of risk. The Ovintiv is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,509  in Ovintiv on November 29, 2024 and sell it today you would lose (319.00) from holding Ovintiv or give up 7.07% of portfolio value 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 latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Ovintiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ovintiv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.