Correlation Between Petro Viking and MDM Permian

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

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

Diversification Opportunities for Petro Viking and MDM Permian

-0.27

Correlation Coefficient

Petro Viking  MDM Permian

Very good diversification

The 3 months correlation between Petro and MDM is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Petro Viking Energy and MDM Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDM Permian and Petro Viking 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 Petro Viking Energy are associated (or correlated) with MDM Permian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDM Permian has no effect on the direction of Petro Viking i.e., Petro Viking and MDM Permian go up and down completely randomly.

Pair Corralation between Petro Viking and MDM Permian

Assuming the 90 days horizon Petro Viking Energy is expected to generate 6.84 times more return on investment than MDM Permian. However, Petro Viking is 6.84 times more volatile than MDM Permian. It trades about 0.14 of its potential returns per unit of risk. MDM Permian is currently generating about 0.12 per unit of risk. If you would invest  0.84  in Petro Viking Energy on December 27, 2024 and sell it today you would lose (0.48) from holding Petro Viking Energy or give up 57.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Petro Viking Energy  vs.  MDM Permian

Petro Viking Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Viking Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Petro Viking reported solid returns over the last few months and may actually be approaching a breakup point.

MDM Permian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, MDM Permian reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petro Viking and MDM Permian

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

The idea behind Petro Viking Energy and MDM Permian 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.