Correlation Between CGX Energy and PrimeEnergy

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

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

Diversification Opportunities for CGX Energy and PrimeEnergy

0.15

Correlation Coefficient

CGX Energy  PrimeEnergy

Average diversification

The 3 months correlation between CGX and PrimeEnergy is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CGX Energy and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy 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 PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of CGX Energy i.e., CGX Energy and PrimeEnergy go up and down completely randomly.

Pair Corralation between CGX Energy and PrimeEnergy

Assuming the 90 days horizon CGX Energy is expected to under-perform the PrimeEnergy. In addition to that, CGX Energy is 2.12 times more volatile than PrimeEnergy. It trades about -0.06 of its total potential returns per unit of risk. PrimeEnergy is currently generating about 0.09 per unit of volatility. If you would invest  8,160  in PrimeEnergy on October 5, 2024 and sell it today you would earn a total of  12,430  from holding PrimeEnergy or generate 152.33% return on investment over 90 days.

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

CGX Energy  vs.  PrimeEnergy

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.

PrimeEnergy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, PrimeEnergy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CGX Energy and PrimeEnergy

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

The idea behind CGX Energy and PrimeEnergy 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.