Correlation Between MEG Energy and CHEVRON CDR

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Can any of the company-specific risk be diversified away by investing in both MEG Energy and CHEVRON CDR 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 MEG Energy and CHEVRON CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MEG Energy Corp and CHEVRON CDR, you can compare the effects of market volatilities on MEG Energy and CHEVRON CDR 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 MEG Energy with a short position of CHEVRON CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEG Energy and CHEVRON CDR.

Diversification Opportunities for MEG Energy and CHEVRON CDR

MEGCHEVRONDiversified AwayMEGCHEVRONDiversified Away100%
0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between MEG and CHEVRON is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR and MEG 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 MEG Energy Corp are associated (or correlated) with CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of MEG Energy i.e., MEG Energy and CHEVRON CDR go up and down completely randomly.

Pair Corralation between MEG Energy and CHEVRON CDR

Assuming the 90 days trading horizon MEG Energy Corp is expected to generate 1.46 times more return on investment than CHEVRON CDR. However, MEG Energy is 1.46 times more volatile than CHEVRON CDR. It trades about 0.15 of its potential returns per unit of risk. CHEVRON CDR is currently generating about -0.3 per unit of risk. If you would invest  2,358  in MEG Energy Corp on October 9, 2024 and sell it today you would earn a total of  110.00  from holding MEG Energy Corp or generate 4.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

MEG Energy Corp  vs.  CHEVRON CDR

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -15-10-50510
JavaScript chart by amCharts 3.21.15MEG CHEV
       Timeline  
MEG Energy Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MEG Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan22232425262728
CHEVRON CDR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CHEVRON CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CHEVRON CDR is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1919.52020.52121.522

MEG Energy and CHEVRON CDR Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.39-2.54-1.69-0.84-0.01420.771.582.43.214.02 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15MEG CHEV
       Returns  

Pair Trading with MEG Energy and CHEVRON CDR

The main advantage of trading using opposite MEG Energy and CHEVRON CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEG Energy position performs unexpectedly, CHEVRON CDR 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 CHEVRON CDR will offset losses from the drop in CHEVRON CDR's long position.
The idea behind MEG Energy Corp and CHEVRON CDR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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