Correlation Between Caspian Sunrise and MDM Permian

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

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

Diversification Opportunities for Caspian Sunrise and MDM Permian

-0.15

Correlation Coefficient

Caspian Sunrise  MDM Permian

Good diversification

The 3 months correlation between Caspian and MDM is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Caspian Sunrise Plc and MDM Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDM Permian and Caspian Sunrise 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 Caspian Sunrise Plc 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 Caspian Sunrise i.e., Caspian Sunrise and MDM Permian go up and down completely randomly.

Pair Corralation between Caspian Sunrise and MDM Permian

If you would invest  1.00  in MDM Permian on September 13, 2024 and sell it today you would lose (0.15) from holding MDM Permian or give up 15.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.17%
Values	Daily Returns

Caspian Sunrise Plc  vs.  MDM Permian

Caspian Sunrise Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caspian Sunrise Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Caspian Sunrise is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MDM Permian

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 3 (%) 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 Caspian Sunrise and MDM Permian

The main advantage of trading using opposite Caspian Sunrise and MDM Permian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caspian Sunrise 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 Caspian Sunrise Plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.