Correlation Between MEG Energy and Baytex Energy
Can any of the company-specific risk be diversified away by investing in both MEG Energy and Baytex 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 MEG Energy and Baytex Energy 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 Baytex Energy Corp, you can compare the effects of market volatilities on MEG Energy and Baytex 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 MEG Energy with a short position of Baytex Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and Baytex Energy.
Diversification Opportunities for MEG Energy and Baytex Energy
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MEG and Baytex is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp 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 Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of MEG Energy i.e., MEG Energy and Baytex Energy go up and down completely randomly.
Pair Corralation between MEG Energy and Baytex Energy
Assuming the 90 days trading horizon MEG Energy Corp is expected to generate 0.78 times more return on investment than Baytex Energy. However, MEG Energy Corp is 1.28 times less risky than Baytex Energy. It trades about -0.04 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.05 per unit of risk. If you would invest 2,952 in MEG Energy Corp on August 28, 2024 and sell it today you would lose (350.00) from holding MEG Energy Corp or give up 11.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MEG Energy Corp vs. Baytex Energy Corp
Performance |
| Timeline |
| MEG Energy Corp |
| Baytex Energy Corp |
MEG Energy and Baytex Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEG Energy and Baytex Energy
The main advantage of trading using opposite MEG Energy and Baytex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, Baytex 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 Baytex Energy will offset losses from the drop in Baytex Energy's long position.| MEG Energy vs. Baytex Energy Corp | MEG Energy vs. Whitecap Resources | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. ARC Resources |
| Baytex Energy vs. InPlay Oil Corp | Baytex Energy vs. Yangarra Resources | Baytex Energy vs. iShares Canadian HYBrid | Baytex Energy vs. Altagas Cum Red |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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