Correlation Between MEG Energy and Cardinal Energy
Can any of the company-specific risk be diversified away by investing in both MEG Energy and Cardinal 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 Cardinal 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 Cardinal Energy, you can compare the effects of market volatilities on MEG Energy and Cardinal 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 Cardinal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and Cardinal Energy.
Diversification Opportunities for MEG Energy and Cardinal Energy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MEG and Cardinal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal 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 Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of MEG Energy i.e., MEG Energy and Cardinal Energy go up and down completely randomly.
Pair Corralation between MEG Energy and Cardinal Energy
Assuming the 90 days horizon MEG Energy Corp is expected to generate 1.19 times more return on investment than Cardinal Energy. However, MEG Energy is 1.19 times more volatile than Cardinal Energy. It trades about 0.04 of its potential returns per unit of risk. Cardinal Energy is currently generating about 0.01 per unit of risk. If you would invest 1,262 in MEG Energy Corp on August 29, 2024 and sell it today you would earn a total of 498.00 from holding MEG Energy Corp or generate 39.46% 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. Cardinal Energy
Performance |
| Timeline |
| MEG Energy Corp |
| Cardinal Energy |
MEG Energy and Cardinal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEG Energy and Cardinal Energy
The main advantage of trading using opposite MEG Energy and Cardinal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, Cardinal 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 Cardinal Energy will offset losses from the drop in Cardinal Energy's long position.| MEG Energy vs. Gear Energy | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. Cardinal Energy | MEG Energy vs. Whitecap Resources |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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