Correlation Between International Petroleum and Gear Energy
Can any of the company-specific risk be diversified away by investing in both International Petroleum and Gear 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 International Petroleum and Gear Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Petroleum Corp and Gear Energy, you can compare the effects of market volatilities on International Petroleum and Gear 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 International Petroleum with a short position of Gear Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Petroleum and Gear Energy.
Diversification Opportunities for International Petroleum and Gear Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Gear is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum Corp and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and International Petroleum 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 International Petroleum Corp are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of International Petroleum i.e., International Petroleum and Gear Energy go up and down completely randomly.
Pair Corralation between International Petroleum and Gear Energy
Assuming the 90 days trading horizon International Petroleum is expected to generate 9.17 times less return on investment than Gear Energy. But when comparing it to its historical volatility, International Petroleum Corp is 1.15 times less risky than Gear Energy. It trades about 0.01 of its potential returns per unit of risk. Gear Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 52.00 in Gear Energy on August 30, 2024 and sell it today you would earn a total of 1.00 from holding Gear Energy or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Petroleum Corp vs. Gear Energy
Performance |
| Timeline |
| International Petroleum |
| Gear Energy |
International Petroleum and Gear Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Petroleum and Gear Energy
The main advantage of trading using opposite International Petroleum and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum position performs unexpectedly, Gear 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 Gear Energy will offset losses from the drop in Gear Energy's long position.| International Petroleum vs. Topaz Energy Corp | International Petroleum vs. Spartan Delta Corp | International Petroleum vs. Africa Oil Corp | International Petroleum vs. Headwater Exploration |
| Gear Energy vs. Cardinal Energy | Gear Energy vs. Tamarack Valley Energy | Gear Energy vs. Athabasca Oil Corp | Gear Energy vs. Headwater Exploration |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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