Correlation Between Paramount Resources and Gear Energy
Can any of the company-specific risk be diversified away by investing in both Paramount Resources 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 Paramount Resources and Gear Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paramount Resources and Gear Energy, you can compare the effects of market volatilities on Paramount Resources 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 Paramount Resources with a short position of Gear Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Resources and Gear Energy.
Diversification Opportunities for Paramount Resources and Gear Energy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Paramount and Gear is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Resources and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and Paramount Resources 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 Paramount 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 Paramount Resources i.e., Paramount Resources and Gear Energy go up and down completely randomly.
Pair Corralation between Paramount Resources and Gear Energy
Assuming the 90 days horizon Paramount Resources is expected to generate 6.27 times less return on investment than Gear Energy. But when comparing it to its historical volatility, Paramount Resources is 1.4 times less risky than Gear Energy. It trades about 0.03 of its potential returns per unit of risk. Gear Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Gear Energy on October 12, 2024 and sell it today you would earn a total of 2.00 from holding Gear Energy or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paramount Resources vs. Gear Energy
Performance |
| Timeline |
| Paramount Resources |
| Gear Energy |
Paramount Resources and Gear Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paramount Resources and Gear Energy
The main advantage of trading using opposite Paramount Resources and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Resources 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.| Paramount Resources vs. Gear Energy | Paramount Resources vs. Valeura Energy | Paramount Resources vs. Birchcliff Energy | Paramount Resources vs. Canacol Energy |
| Gear Energy vs. Tamarack Valley Energy | Gear Energy vs. MEG Energy Corp | Gear Energy vs. Cardinal Energy | Gear Energy vs. Whitecap Resources |
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.
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