Correlation Between CGX Energy and Desert Mountain

Can any of the company-specific risk be diversified away by investing in both CGX Energy and Desert Mountain 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 CGX Energy and Desert Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CGX Energy and Desert Mountain Energy, you can compare the effects of market volatilities on CGX Energy and Desert Mountain 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 CGX Energy with a short position of Desert Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGX Energy and Desert Mountain.

Diversification Opportunities for CGX Energy and Desert Mountain

0.01

Correlation Coefficient

CGX Energy  Desert Mountain

Significant diversification

The 3 months correlation between CGX and Desert is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CGX Energy and Desert Mountain Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desert Mountain Energy and CGX 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 CGX Energy are associated (or correlated) with Desert Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desert Mountain Energy has no effect on the direction of CGX Energy i.e., CGX Energy and Desert Mountain go up and down completely randomly.

Pair Corralation between CGX Energy and Desert Mountain

Assuming the 90 days horizon CGX Energy is expected to under-perform the Desert Mountain. But the pink sheet apears to be less risky and, when comparing its historical volatility, CGX Energy is 1.05 times less risky than Desert Mountain. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Desert Mountain Energy is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  217.00  in Desert Mountain Energy on October 11, 2024 and sell it today you would lose (194.00) from holding Desert Mountain Energy or give up 89.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CGX Energy  vs.  Desert Mountain Energy

CGX Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGX Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Desert Mountain Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Desert Mountain Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Desert Mountain may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CGX Energy and Desert Mountain

The main advantage of trading using opposite CGX Energy and Desert Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGX Energy position performs unexpectedly, Desert Mountain 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 Desert Mountain will offset losses from the drop in Desert Mountain's long position.

The idea behind CGX Energy and Desert Mountain Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.