Correlation Between Gear Energy and MEG Energy

Specify exactly 2 symbols:
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

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Gear and MEG is 0.35. 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 trading horizon Gear Energy is expected to under-perform the MEG Energy. In addition to that, Gear Energy is 1.34 times more volatile than MEG Energy Corp. It trades about -0.01 of its total potential returns per unit of risk. MEG Energy Corp is currently generating about -0.01 per unit of volatility. If you would invest  2,668  in MEG Energy Corp on September 14, 2024 and sell it today you would lose (295.00) from holding MEG Energy Corp or give up 11.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Gear Energy  vs.  MEG Energy Corp

 Performance 
       Timeline  
Gear Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
MEG Energy Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MEG Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MEG Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.
The idea behind Gear Energy and MEG Energy Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

Other Complementary Tools

Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance