Correlation Between Valeura Energy and Gear Energy

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

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

Diversification Opportunities for Valeura Energy and Gear Energy

-0.63

Correlation Coefficient

Valeura Energy  Gear Energy

Excellent diversification

The 3 months correlation between Valeura and Gear is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and Valeura 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 Valeura Energy 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 Valeura Energy i.e., Valeura Energy and Gear Energy go up and down completely randomly.

Pair Corralation between Valeura Energy and Gear Energy

Assuming the 90 days trading horizon Valeura Energy is expected to generate 1.39 times more return on investment than Gear Energy. However, Valeura Energy is 1.39 times more volatile than Gear Energy. It trades about 0.13 of its potential returns per unit of risk. Gear Energy is currently generating about 0.01 per unit of risk. If you would invest  269.00  in Valeura Energy on October 6, 2024 and sell it today you would earn a total of  462.00  from holding Valeura Energy or generate 171.75% return on investment over 90 days.

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

Valeura Energy  vs.  Gear Energy

Valeura Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 16 (%) 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.

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 Valeura Energy and Gear Energy

The main advantage of trading using opposite Valeura Energy and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valeura Energy 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 Valeura Energy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.