Correlation Between MEG Energy and Whitecap Resources
Can any of the company-specific risk be diversified away by investing in both MEG Energy and Whitecap 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 Whitecap 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 Whitecap Resources, you can compare the effects of market volatilities on MEG Energy and Whitecap 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 Whitecap Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and Whitecap Resources.
Diversification Opportunities for MEG Energy and Whitecap Resources
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MEG and Whitecap is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap 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 Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of MEG Energy i.e., MEG Energy and Whitecap Resources go up and down completely randomly.
Pair Corralation between MEG Energy and Whitecap Resources
Assuming the 90 days trading horizon MEG Energy Corp is expected to generate 1.7 times more return on investment than Whitecap Resources. However, MEG Energy is 1.7 times more volatile than Whitecap Resources. It trades about 0.09 of its potential returns per unit of risk. Whitecap Resources is currently generating about 0.09 per unit of risk. If you would invest 2,562 in MEG Energy Corp on August 25, 2024 and sell it today you would earn a total of 103.00 from holding MEG Energy Corp or generate 4.02% 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. Whitecap Resources
Performance |
| Timeline |
| MEG Energy Corp |
| Whitecap Resources |
MEG Energy and Whitecap Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEG Energy and Whitecap Resources
The main advantage of trading using opposite MEG Energy and Whitecap Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, Whitecap 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 Whitecap Resources will offset losses from the drop in Whitecap 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 |
| Whitecap Resources vs. ARC Resources | Whitecap Resources vs. Tourmaline Oil Corp | Whitecap Resources vs. MEG Energy Corp | Whitecap Resources vs. Baytex 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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