Correlation Between Gear Energy and Rockdale Resources

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

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

Diversification Opportunities for Gear Energy and Rockdale Resources

0.69

Correlation Coefficient

Gear Energy  Rockdale Resources

Poor diversification

The 3 months correlation between Gear and Rockdale is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Rockdale Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockdale Resources Corp and Gear 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 Gear Energy are associated (or correlated) with Rockdale Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockdale Resources Corp has no effect on the direction of Gear Energy i.e., Gear Energy and Rockdale Resources go up and down completely randomly.

Pair Corralation between Gear Energy and Rockdale Resources

Assuming the 90 days horizon Gear Energy is expected to generate 0.13 times more return on investment than Rockdale Resources. However, Gear Energy is 7.78 times less risky than Rockdale Resources. It trades about -0.12 of its potential returns per unit of risk. Rockdale Resources Corp is currently generating about -0.19 per unit of risk. If you would invest  44.00  in Gear Energy on September 13, 2024 and sell it today you would lose (8.00) from holding Gear Energy or give up 18.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	44.44%
Values	Daily Returns

Gear Energy  vs.  Rockdale Resources Corp

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. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rockdale Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockdale Resources Corp 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 essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gear Energy and Rockdale Resources

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

The idea behind Gear Energy and Rockdale Resources Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.