Correlation Between Prairie Provident and Gear Energy
Can any of the company-specific risk be diversified away by investing in both Prairie Provident and Gear 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 Prairie Provident and Gear Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prairie Provident Resources and Gear Energy, you can compare the effects of market volatilities on Prairie Provident and Gear 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 Prairie Provident with a short position of Gear Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prairie Provident and Gear Energy.
Diversification Opportunities for Prairie Provident and Gear Energy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prairie and Gear is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and Prairie Provident 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 Prairie Provident Resources are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of Prairie Provident i.e., Prairie Provident and Gear Energy go up and down completely randomly.
Pair Corralation between Prairie Provident and Gear Energy
Assuming the 90 days trading horizon Prairie Provident Resources is expected to generate 3.91 times more return on investment than Gear Energy. However, Prairie Provident is 3.91 times more volatile than Gear Energy. It trades about 0.13 of its potential returns per unit of risk. Gear Energy is currently generating about 0.04 per unit of risk. If you would invest 2.50 in Prairie Provident Resources on September 14, 2024 and sell it today you would earn a total of 0.50 from holding Prairie Provident Resources or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prairie Provident Resources vs. Gear Energy
Performance |
| Timeline |
| Prairie Provident |
| Gear Energy |
Prairie Provident and Gear Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prairie Provident and Gear Energy
The main advantage of trading using opposite Prairie Provident and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prairie Provident position performs unexpectedly, Gear 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 Gear Energy will offset losses from the drop in Gear Energy's long position.| Prairie Provident vs. Pine Cliff Energy | Prairie Provident vs. InPlay Oil Corp | Prairie Provident vs. Journey Energy |
| Gear Energy vs. Cardinal Energy | Gear Energy vs. Tamarack Valley Energy | Gear Energy vs. Athabasca Oil Corp | Gear Energy vs. Headwater Exploration |
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 CEOs Directory module to screen CEOs from public companies around the world.
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