Correlation Between Gear Energy and Valeura Energy

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

Diversification Opportunities for Gear Energy and Valeura Energy

-0.66

Correlation Coefficient

Gear Energy  Valeura Energy

Excellent diversification

The 3 months correlation between Gear and Valeura is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Gear Energy i.e., Gear Energy and Valeura Energy go up and down completely randomly.

Pair Corralation between Gear Energy and Valeura Energy

Assuming the 90 days trading horizon Gear Energy is expected to under-perform the Valeura Energy. But the stock apears to be less risky and, when comparing its historical volatility, Gear Energy is 1.34 times less risky than Valeura Energy. The stock trades about -0.06 of its potential returns per unit of risk. The Valeura Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  426.00  in Valeura Energy on October 4, 2024 and sell it today you would earn a total of  300.00  from holding Valeura Energy or generate 70.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gear Energy  vs.  Valeura Energy

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Valeura Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gear Energy and Valeura Energy

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

The idea behind Gear Energy and Valeura 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.