Correlation Between Permian Basin and Marcus

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Can any of the company-specific risk be diversified away by investing in both Permian Basin and Marcus 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 Permian Basin and Marcus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Basin Royalty and Marcus, you can compare the effects of market volatilities on Permian Basin and Marcus 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 Permian Basin with a short position of Marcus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Basin and Marcus.

Diversification Opportunities for Permian Basin and Marcus

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Permian and Marcus is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Permian Basin Royalty and Marcus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcus and Permian Basin 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 Permian Basin Royalty are associated (or correlated) with Marcus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcus has no effect on the direction of Permian Basin i.e., Permian Basin and Marcus go up and down completely randomly.

Pair Corralation between Permian Basin and Marcus

Considering the 90-day investment horizon Permian Basin Royalty is expected to under-perform the Marcus. In addition to that, Permian Basin is 4.3 times more volatile than Marcus. It trades about -0.05 of its total potential returns per unit of risk. Marcus is currently generating about -0.06 per unit of volatility. If you would invest  1,439  in Marcus on December 29, 2023 and sell it today you would lose (23.00) from holding Marcus or give up 1.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Permian Basin Royalty  vs.  Marcus

 Performance 
       Timeline  
Permian Basin Royalty 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Permian Basin Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Marcus 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Marcus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Marcus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Permian Basin and Marcus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Permian Basin and Marcus

The main advantage of trading using opposite Permian Basin and Marcus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Basin position performs unexpectedly, Marcus 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 Marcus will offset losses from the drop in Marcus' long position.
The idea behind Permian Basin Royalty and Marcus 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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