Correlation Between MEG Energy and ARC Resources
Can any of the company-specific risk be diversified away by investing in both MEG Energy and ARC 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 MEG Energy and ARC Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MEG Energy Corp and ARC Resources, you can compare the effects of market volatilities on MEG Energy and ARC 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 MEG Energy with a short position of ARC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and ARC Resources.
Diversification Opportunities for MEG Energy and ARC Resources
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MEG and ARC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and ARC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Resources and MEG 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 MEG Energy Corp are associated (or correlated) with ARC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Resources has no effect on the direction of MEG Energy i.e., MEG Energy and ARC Resources go up and down completely randomly.
Pair Corralation between MEG Energy and ARC Resources
Assuming the 90 days trading horizon MEG Energy Corp is expected to under-perform the ARC Resources. In addition to that, MEG Energy is 1.09 times more volatile than ARC Resources. It trades about -0.04 of its total potential returns per unit of risk. ARC Resources is currently generating about 0.26 per unit of volatility. If you would invest 2,359 in ARC Resources on August 28, 2024 and sell it today you would earn a total of 313.00 from holding ARC Resources or generate 13.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MEG Energy Corp vs. ARC Resources
Performance |
| Timeline |
| MEG Energy Corp |
| ARC Resources |
MEG Energy and ARC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEG Energy and ARC Resources
The main advantage of trading using opposite MEG Energy and ARC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, ARC 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 ARC Resources will offset losses from the drop in ARC Resources' long position.| MEG Energy vs. Baytex Energy Corp | MEG Energy vs. Whitecap Resources | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. ARC Resources |
| ARC Resources vs. Yangarra Resources | ARC Resources vs. iShares Canadian HYBrid | ARC Resources vs. Altagas Cum Red | ARC Resources vs. European Residential Real |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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