Correlation Between Gear Energy and Capricorn Energy

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

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

Diversification Opportunities for Gear Energy and Capricorn Energy

0.51

Correlation Coefficient

Gear Energy  Capricorn Energy

Very weak diversification

The 3 months correlation between Gear and Capricorn is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy PLC and Gear 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 Gear Energy are associated (or correlated) with Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of Gear Energy i.e., Gear Energy and Capricorn Energy go up and down completely randomly.

Pair Corralation between Gear Energy and Capricorn Energy

Assuming the 90 days horizon Gear Energy is expected to under-perform the Capricorn Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Gear Energy is 2.14 times less risky than Capricorn Energy. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Capricorn Energy PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  740.00  in Capricorn Energy PLC on December 29, 2024 and sell it today you would lose (40.00) from holding Capricorn Energy PLC or give up 5.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.9%
Values	Daily Returns

Gear Energy  vs.  Capricorn Energy PLC

Gear Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Capricorn Energy PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capricorn Energy PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Capricorn Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gear Energy and Capricorn Energy

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

The idea behind Gear Energy and Capricorn Energy PLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.