Correlation Between Paramount Resources and Ovintiv

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

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

Diversification Opportunities for Paramount Resources and Ovintiv

0.87

Correlation Coefficient

Paramount Resources  Ovintiv

Very poor diversification

The 3 months correlation between Paramount and Ovintiv is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Resources and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv and Paramount Resources 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 Paramount Resources 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 Paramount Resources i.e., Paramount Resources and Ovintiv go up and down completely randomly.

Pair Corralation between Paramount Resources and Ovintiv

Assuming the 90 days trading horizon Paramount Resources is expected to generate 1.04 times more return on investment than Ovintiv. However, Paramount Resources is 1.04 times more volatile than Ovintiv. It trades about 0.13 of its potential returns per unit of risk. Ovintiv is currently generating about 0.05 per unit of risk. If you would invest  2,529  in Paramount Resources on September 17, 2024 and sell it today you would earn a total of  521.00  from holding Paramount Resources or generate 20.6% return on investment over 90 days.

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

Paramount Resources  vs.  Ovintiv

Paramount Resources

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Paramount Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Ovintiv

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Paramount Resources and Ovintiv

The main advantage of trading using opposite Paramount Resources and Ovintiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Resources 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 Paramount Resources 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.