Correlation Between Pulse Oil and Gear Energy

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

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

Diversification Opportunities for Pulse Oil and Gear Energy

0.73

Correlation Coefficient

Pulse Oil  Gear Energy

Poor diversification

The 3 months correlation between Pulse and Gear is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pulse Oil Corp and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and Pulse Oil 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 Pulse Oil Corp are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of Pulse Oil i.e., Pulse Oil and Gear Energy go up and down completely randomly.

Pair Corralation between Pulse Oil and Gear Energy

Assuming the 90 days horizon Pulse Oil Corp is expected to generate 5.03 times more return on investment than Gear Energy. However, Pulse Oil is 5.03 times more volatile than Gear Energy. It trades about 0.01 of its potential returns per unit of risk. Gear Energy is currently generating about -0.04 per unit of risk. If you would invest  2.50  in Pulse Oil Corp on September 8, 2024 and sell it today you would lose (1.00) from holding Pulse Oil Corp or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Pulse Oil Corp  vs.  Gear Energy

Pulse Oil Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pulse Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Pulse Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 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.

Pair Trading with Pulse Oil and Gear Energy

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

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