Correlation Between MV Oil and VOC Energy

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

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

Diversification Opportunities for MV Oil and VOC Energy

0.42

Correlation Coefficient

MV Oil  VOC Energy

Very weak diversification

The 3 months correlation between MVO and VOC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and VOC Energy Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOC Energy Trust and MV Oil 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 MV Oil Trust are associated (or correlated) with VOC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOC Energy Trust has no effect on the direction of MV Oil i.e., MV Oil and VOC Energy go up and down completely randomly.

Pair Corralation between MV Oil and VOC Energy

Considering the 90-day investment horizon MV Oil Trust is expected to under-perform the VOC Energy. But the stock apears to be less risky and, when comparing its historical volatility, MV Oil Trust is 1.22 times less risky than VOC Energy. The stock trades about -0.02 of its potential returns per unit of risk. The VOC Energy Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  449.00  in VOC Energy Trust on September 24, 2024 and sell it today you would earn a total of  23.00  from holding VOC Energy Trust or generate 5.12% return on investment over 90 days.

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

MV Oil Trust  vs.  VOC Energy Trust

MV Oil Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MV Oil Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

VOC Energy Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOC Energy Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VOC Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MV Oil and VOC Energy

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

The idea behind MV Oil Trust and VOC Energy Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.