Correlation Between Gear Energy and Paramount Resources
Can any of the company-specific risk be diversified away by investing in both Gear Energy and Paramount Resources 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 Paramount Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gear Energy and Paramount Resources, you can compare the effects of market volatilities on Gear Energy and Paramount Resources 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 Paramount Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear Energy and Paramount Resources.
Diversification Opportunities for Gear Energy and Paramount Resources
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gear and Paramount is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources 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 Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Gear Energy i.e., Gear Energy and Paramount Resources go up and down completely randomly.
Pair Corralation between Gear Energy and Paramount Resources
Assuming the 90 days horizon Gear Energy is expected to under-perform the Paramount Resources. In addition to that, Gear Energy is 1.01 times more volatile than Paramount Resources. It trades about -0.13 of its total potential returns per unit of risk. Paramount Resources is currently generating about 0.08 per unit of volatility. If you would invest 2,007 in Paramount Resources on October 12, 2024 and sell it today you would earn a total of 205.00 from holding Paramount Resources or generate 10.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gear Energy vs. Paramount Resources
Performance |
| Timeline |
| Gear Energy |
| Paramount Resources |
Gear Energy and Paramount Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gear Energy and Paramount Resources
The main advantage of trading using opposite Gear Energy and Paramount Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear Energy position performs unexpectedly, Paramount Resources 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 Paramount Resources will offset losses from the drop in Paramount Resources' long position.| Gear Energy vs. Tamarack Valley Energy | Gear Energy vs. MEG Energy Corp | Gear Energy vs. Cardinal Energy | Gear Energy vs. Whitecap Resources |
| Paramount Resources vs. Gear Energy | Paramount Resources vs. Valeura Energy | Paramount Resources vs. Birchcliff Energy | Paramount Resources vs. Canacol Energy |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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