Correlation Between PrimeEnergy and CGX Energy

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

By analyzing existing cross correlation between PrimeEnergy and CGX Energy, you can compare the effects of market volatilities on PrimeEnergy and CGX 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 PrimeEnergy with a short position of CGX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PrimeEnergy and CGX Energy.

Diversification Opportunities for PrimeEnergy and CGX Energy

0.15

Correlation Coefficient

PrimeEnergy  CGX Energy

Average diversification

The 3 months correlation between PrimeEnergy and CGX is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and CGX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGX Energy and PrimeEnergy 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 PrimeEnergy are associated (or correlated) with CGX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGX Energy has no effect on the direction of PrimeEnergy i.e., PrimeEnergy and CGX Energy go up and down completely randomly.

Pair Corralation between PrimeEnergy and CGX Energy

Given the investment horizon of 90 days PrimeEnergy is expected to generate 0.47 times more return on investment than CGX Energy. However, PrimeEnergy is 2.12 times less risky than CGX Energy. It trades about 0.09 of its potential returns per unit of risk. CGX Energy is currently generating about -0.06 per unit of risk. If you would invest  8,160  in PrimeEnergy on October 5, 2024 and sell it today you would earn a total of  12,430  from holding PrimeEnergy or generate 152.33% return on investment over 90 days.

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

PrimeEnergy  vs.  CGX Energy

PrimeEnergy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, PrimeEnergy reported solid returns over the last few months and may actually be approaching a breakup point.

CGX Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PrimeEnergy and CGX Energy

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

The idea behind PrimeEnergy and CGX 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.