Correlation Between Empire Petroleum and CGX Energy

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

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

Diversification Opportunities for Empire Petroleum and CGX Energy

-0.55

Correlation Coefficient

Empire Petroleum  CGX Energy

Excellent diversification

The 3 months correlation between Empire and CGX is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and CGX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGX Energy and Empire Petroleum 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 Empire Petroleum Corp are associated (or correlated) with CGX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGX Energy has no effect on the direction of Empire Petroleum i.e., Empire Petroleum and CGX Energy go up and down completely randomly.

Pair Corralation between Empire Petroleum and CGX Energy

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to generate 0.72 times more return on investment than CGX Energy. However, Empire Petroleum Corp is 1.39 times less risky than CGX Energy. It trades about 0.0 of its potential returns per unit of risk. CGX Energy is currently generating about -0.06 per unit of risk. If you would invest  1,262  in Empire Petroleum Corp on October 9, 2024 and sell it today you would lose (518.00) from holding Empire Petroleum Corp or give up 41.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Empire Petroleum Corp  vs.  CGX Energy

Empire Petroleum Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Petroleum Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Empire Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

CGX Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Empire Petroleum and CGX Energy

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

The idea behind Empire Petroleum Corp and CGX 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .