Correlation Between Gear Energy and Tourmaline Oil

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

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

Diversification Opportunities for Gear Energy and Tourmaline Oil

-0.27

Correlation Coefficient

Gear Energy  Tourmaline Oil

Very good diversification

The 3 months correlation between Gear and Tourmaline is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Tourmaline Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourmaline Oil 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 Tourmaline Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourmaline Oil Corp has no effect on the direction of Gear Energy i.e., Gear Energy and Tourmaline Oil go up and down completely randomly.

Pair Corralation between Gear Energy and Tourmaline Oil

Assuming the 90 days horizon Gear Energy is expected to under-perform the Tourmaline Oil. In addition to that, Gear Energy is 1.7 times more volatile than Tourmaline Oil Corp. It trades about -0.07 of its total potential returns per unit of risk. Tourmaline Oil Corp is currently generating about 0.03 per unit of volatility. If you would invest  4,668  in Tourmaline Oil Corp on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Tourmaline Oil Corp or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.16%
Values	Daily Returns

Gear Energy  vs.  Tourmaline Oil 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.

Tourmaline Oil Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tourmaline Oil Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Tourmaline Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gear Energy and Tourmaline Oil

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

The idea behind Gear Energy and Tourmaline Oil 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.