Correlation Between Permianville Royalty and Ovintiv

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

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

Diversification Opportunities for Permianville Royalty and Ovintiv

0.44

Correlation Coefficient

Permianville Royalty  Ovintiv

Very weak diversification

The 3 months correlation between Permianville and Ovintiv is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv and Permianville Royalty 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 Permianville Royalty Trust 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 Permianville Royalty i.e., Permianville Royalty and Ovintiv go up and down completely randomly.

Pair Corralation between Permianville Royalty and Ovintiv

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the Ovintiv. In addition to that, Permianville Royalty is 1.54 times more volatile than Ovintiv. It trades about -0.02 of its total potential returns per unit of risk. Ovintiv is currently generating about 0.34 per unit of volatility. If you would invest  3,977  in Ovintiv on October 15, 2024 and sell it today you would earn a total of  384.00  from holding Ovintiv or generate 9.66% return on investment over 90 days.

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

Permianville Royalty Trust  vs.  Ovintiv

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Permianville Royalty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ovintiv

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 5 (%) 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 February 2025.

Pair Trading with Permianville Royalty and Ovintiv

The main advantage of trading using opposite Permianville Royalty and Ovintiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permianville Royalty 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 Permianville Royalty Trust 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.