Correlation Between MEG Energy and Vermilion Energy
Can any of the company-specific risk be diversified away by investing in both MEG Energy and Vermilion 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 Vermilion 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 Vermilion Energy, you can compare the effects of market volatilities on MEG Energy and Vermilion 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 Vermilion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and Vermilion Energy.
Diversification Opportunities for MEG Energy and Vermilion Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MEG and Vermilion is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Vermilion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vermilion Energy 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 Vermilion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vermilion Energy has no effect on the direction of MEG Energy i.e., MEG Energy and Vermilion Energy go up and down completely randomly.
Pair Corralation between MEG Energy and Vermilion Energy
Assuming the 90 days trading horizon MEG Energy is expected to generate 2.33 times less return on investment than Vermilion Energy. But when comparing it to its historical volatility, MEG Energy Corp is 1.17 times less risky than Vermilion Energy. It trades about 0.09 of its potential returns per unit of risk. Vermilion Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,356 in Vermilion Energy on August 25, 2024 and sell it today you would earn a total of 138.00 from holding Vermilion Energy or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MEG Energy Corp vs. Vermilion Energy
Performance |
| Timeline |
| MEG Energy Corp |
| Vermilion Energy |
MEG Energy and Vermilion Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEG Energy and Vermilion Energy
The main advantage of trading using opposite MEG Energy and Vermilion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, Vermilion 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 Vermilion Energy will offset losses from the drop in Vermilion 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 |
| Vermilion Energy vs. Whitecap Resources | Vermilion Energy vs. ARC Resources | Vermilion Energy vs. Tourmaline Oil Corp | Vermilion Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Transaction History View history of all your transactions and understand their impact on performance |