Correlation Between Gear Energy and PetroTal Corp

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

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

Diversification Opportunities for Gear Energy and PetroTal Corp

-0.29

Correlation Coefficient

Gear Energy  PetroTal Corp

Very good diversification

The 3 months correlation between Gear and PetroTal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and PetroTal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroTal Corp 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 PetroTal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroTal Corp has no effect on the direction of Gear Energy i.e., Gear Energy and PetroTal Corp go up and down completely randomly.

Pair Corralation between Gear Energy and PetroTal Corp

Assuming the 90 days horizon Gear Energy is expected to under-perform the PetroTal Corp. In addition to that, Gear Energy is 1.05 times more volatile than PetroTal Corp. It trades about -0.07 of its total potential returns per unit of risk. PetroTal Corp is currently generating about 0.15 per unit of volatility. If you would invest  39.00  in PetroTal Corp on December 29, 2024 and sell it today you would earn a total of  9.00  from holding PetroTal Corp or generate 23.08% return on investment over 90 days.

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

Gear Energy  vs.  PetroTal Corp

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.

PetroTal Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PetroTal Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, PetroTal Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gear Energy and PetroTal Corp

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

The idea behind Gear Energy and PetroTal Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.