Correlation Between Gear Energy and MEG Energy
Can any of the company-specific risk be diversified away by investing in both Gear Energy 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 Gear Energy and MEG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gear Energy and MEG Energy Corp, you can compare the effects of market volatilities on Gear Energy 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 Gear Energy with a short position of MEG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear Energy and MEG Energy.
Diversification Opportunities for Gear Energy and MEG Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gear and MEG is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy 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 Gear Energy 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 Gear Energy 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 Gear Energy i.e., Gear Energy and MEG Energy go up and down completely randomly.
Pair Corralation between Gear Energy and MEG Energy
Assuming the 90 days horizon Gear Energy is expected to under-perform the MEG Energy. In addition to that, Gear Energy is 1.3 times more volatile than MEG Energy Corp. It trades about -0.02 of its total potential returns per unit of risk. MEG Energy Corp is currently generating about 0.04 per unit of volatility. If you would invest 1,262 in MEG Energy Corp on August 29, 2024 and sell it today you would earn a total of 498.00 from holding MEG Energy Corp or generate 39.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Gear Energy vs. MEG Energy Corp
Performance |
| Timeline |
| Gear Energy |
| MEG Energy Corp |
Gear Energy and MEG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gear Energy and MEG Energy
The main advantage of trading using opposite Gear Energy and MEG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear Energy 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.| Gear Energy vs. Petroleo Brasileiro Petrobras | Gear Energy vs. Equinor ASA ADR | Gear Energy vs. Eni SpA ADR | Gear Energy vs. YPF Sociedad Anonima |
| MEG Energy vs. Gear Energy | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. Cardinal Energy | MEG Energy vs. Whitecap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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