Correlation Between MEG Energy and Parex Resources
Can any of the company-specific risk be diversified away by investing in both MEG Energy and Parex 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 Parex 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 Parex Resources, you can compare the effects of market volatilities on MEG Energy and Parex 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 Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and Parex Resources.
Diversification Opportunities for MEG Energy and Parex Resources
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MEG and Parex is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of MEG Energy i.e., MEG Energy and Parex Resources go up and down completely randomly.
Pair Corralation between MEG Energy and Parex Resources
Assuming the 90 days trading horizon MEG Energy is expected to generate 6.07 times less return on investment than Parex Resources. In addition to that, MEG Energy is 1.1 times more volatile than Parex Resources. It trades about 0.06 of its total potential returns per unit of risk. Parex Resources is currently generating about 0.38 per unit of volatility. If you would invest 1,300 in Parex Resources on August 26, 2024 and sell it today you would earn a total of 224.00 from holding Parex Resources or generate 17.23% 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. Parex Resources
Performance |
| Timeline |
| MEG Energy Corp |
| Parex Resources |
MEG Energy and Parex Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEG Energy and Parex Resources
The main advantage of trading using opposite MEG Energy and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, Parex 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 Parex Resources will offset losses from the drop in Parex 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 |
| Parex Resources vs. Tourmaline Oil Corp | Parex Resources vs. PrairieSky Royalty | Parex Resources vs. ARC Resources | Parex Resources vs. MEG Energy Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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