Correlation Between CGX Energy and Epsilon Energy

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

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

Diversification Opportunities for CGX Energy and Epsilon Energy

-0.29

Correlation Coefficient

CGX Energy  Epsilon Energy

Very good diversification

The 3 months correlation between CGX and Epsilon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CGX Energy and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon 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 Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of CGX Energy i.e., CGX Energy and Epsilon Energy go up and down completely randomly.

Pair Corralation between CGX Energy and Epsilon Energy

Assuming the 90 days horizon CGX Energy is expected to under-perform the Epsilon Energy. In addition to that, CGX Energy is 3.13 times more volatile than Epsilon Energy. It trades about -0.06 of its total potential returns per unit of risk. Epsilon Energy is currently generating about 0.05 per unit of volatility. If you would invest  448.00  in Epsilon Energy on October 5, 2024 and sell it today you would earn a total of  169.00  from holding Epsilon Energy or generate 37.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

CGX Energy  vs.  Epsilon Energy

CGX Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Epsilon Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Epsilon Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CGX Energy and Epsilon Energy

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

The idea behind CGX Energy and Epsilon 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.