Correlation Between ARC Resources and MEG Energy
Can any of the company-specific risk be diversified away by investing in both ARC Resources and MEG 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 ARC Resources and MEG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARC Resources and MEG Energy Corp, you can compare the effects of market volatilities on ARC Resources and MEG 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 ARC Resources with a short position of MEG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARC Resources and MEG Energy.
Diversification Opportunities for ARC Resources and MEG Energy
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARC and MEG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and MEG Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEG Energy Corp and ARC 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 ARC Resources are associated (or correlated) with MEG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEG Energy Corp has no effect on the direction of ARC Resources i.e., ARC Resources and MEG Energy go up and down completely randomly.
Pair Corralation between ARC Resources and MEG Energy
Assuming the 90 days trading horizon ARC Resources is expected to generate 1.04 times more return on investment than MEG Energy. However, ARC Resources is 1.04 times more volatile than MEG Energy Corp. It trades about 0.25 of its potential returns per unit of risk. MEG Energy Corp is currently generating about 0.09 per unit of risk. If you would invest 2,371 in ARC Resources on August 25, 2024 and sell it today you would earn a total of 305.00 from holding ARC Resources or generate 12.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARC Resources vs. MEG Energy Corp
Performance |
| Timeline |
| ARC Resources |
| MEG Energy Corp |
ARC Resources and MEG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARC Resources and MEG Energy
The main advantage of trading using opposite ARC Resources and MEG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARC Resources position performs unexpectedly, MEG 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 MEG Energy will offset losses from the drop in MEG Energy's long position.| ARC Resources vs. Tourmaline Oil Corp | ARC Resources vs. Whitecap Resources | ARC Resources vs. MEG Energy Corp | ARC Resources vs. Vermilion Energy |
| MEG Energy vs. Baytex Energy Corp | MEG Energy vs. Whitecap Resources | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. ARC Resources |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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