Correlation Between Gear Energy and Invictus Energy

Can any of the company-specific risk be diversified away by investing in both Gear Energy and Invictus 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 Invictus 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 Invictus Energy Limited, you can compare the effects of market volatilities on Gear Energy and Invictus 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 Invictus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear Energy and Invictus Energy.

Diversification Opportunities for Gear Energy and Invictus Energy

0.01

Correlation Coefficient

Gear Energy  Invictus Energy

Significant diversification

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

Pair Corralation between Gear Energy and Invictus Energy

Assuming the 90 days horizon Gear Energy is expected to under-perform the Invictus Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Gear Energy is 3.34 times less risky than Invictus Energy. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Invictus Energy Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.25  in Invictus Energy Limited on December 29, 2024 and sell it today you would lose (0.12) from holding Invictus Energy Limited or give up 2.82% of portfolio value over 90 days.

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

Gear Energy  vs.  Invictus Energy Limited

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.

Invictus Energy

Risk-Adjusted Performance

Weak

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

Pair Trading with Gear Energy and Invictus Energy

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

The idea behind Gear Energy and Invictus Energy Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.