Correlation Between Gear Energy and Journey Energy

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

Diversification Opportunities for Gear Energy and Journey Energy

-0.06

Correlation Coefficient

Gear Energy  Journey Energy

Good diversification

The 3 months correlation between Gear and Journey is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Journey Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Journey 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 Journey Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Journey Energy has no effect on the direction of Gear Energy i.e., Gear Energy and Journey Energy go up and down completely randomly.

Pair Corralation between Gear Energy and Journey Energy

Assuming the 90 days horizon Gear Energy is expected to generate 0.93 times more return on investment than Journey Energy. However, Gear Energy is 1.08 times less risky than Journey Energy. It trades about -0.11 of its potential returns per unit of risk. Journey Energy is currently generating about -0.14 per unit of risk. If you would invest  39.00  in Gear Energy on November 29, 2024 and sell it today you would lose (6.00) from holding Gear Energy or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.36%
Values	Daily Returns

Gear Energy  vs.  Journey Energy

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Journey Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Journey Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gear Energy and Journey Energy

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

The idea behind Gear Energy and Journey 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.