Correlation Between Athabasca Oil and Gear Energy

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

Diversification Opportunities for Athabasca Oil and Gear Energy

0.06

Correlation Coefficient

Athabasca Oil  Gear Energy

Significant diversification

The 3 months correlation between Athabasca and Gear is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Athabasca 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 Athabasca 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 Athabasca 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 Athabasca Oil i.e., Athabasca Oil and Gear Energy go up and down completely randomly.

Pair Corralation between Athabasca Oil and Gear Energy

Assuming the 90 days trading horizon Athabasca Oil Corp is expected to under-perform the Gear Energy. But the stock apears to be less risky and, when comparing its historical volatility, Athabasca Oil Corp is 1.21 times less risky than Gear Energy. The stock trades about 0.0 of its potential returns per unit of risk. The Gear Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Gear Energy on September 1, 2024 and sell it today you would earn a total of  1.00  from holding Gear Energy or generate 1.89% return on investment over 90 days.

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

Athabasca Oil Corp  vs.  Gear Energy

Athabasca Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Athabasca Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Athabasca Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Athabasca Oil and Gear Energy

The main advantage of trading using opposite Athabasca Oil and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Athabasca 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 Athabasca 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.