Correlation Between San Juan and Ovintiv

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

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

Diversification Opportunities for San Juan and Ovintiv

0.29

Correlation Coefficient

San Juan  Ovintiv

Modest diversification

The 3 months correlation between San and Ovintiv is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv and San Juan 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 San Juan Basin 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 San Juan i.e., San Juan and Ovintiv go up and down completely randomly.

Pair Corralation between San Juan and Ovintiv

Considering the 90-day investment horizon San Juan Basin is expected to under-perform the Ovintiv. In addition to that, San Juan is 1.4 times more volatile than Ovintiv. It trades about -0.05 of its total potential returns per unit of risk. Ovintiv is currently generating about -0.01 per unit of volatility. If you would invest  4,221  in Ovintiv on September 27, 2024 and sell it today you would lose (345.00) from holding Ovintiv or give up 8.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

San Juan Basin  vs.  Ovintiv

San Juan Basin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, San Juan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ovintiv

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ovintiv is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with San Juan and Ovintiv

The main advantage of trading using opposite San Juan and Ovintiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Juan 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 San Juan Basin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.