Correlation Between Gear Energy and Altura Energy

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

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

Diversification Opportunities for Gear Energy and Altura Energy

0.57

Correlation Coefficient

Gear Energy  Altura Energy

Very weak diversification

The 3 months correlation between Gear and Altura is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Altura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altura Energy 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 Altura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altura Energy has no effect on the direction of Gear Energy i.e., Gear Energy and Altura Energy go up and down completely randomly.

Pair Corralation between Gear Energy and Altura Energy

Assuming the 90 days horizon Gear Energy is expected to generate 1.15 times more return on investment than Altura Energy. However, Gear Energy is 1.15 times more volatile than Altura Energy. It trades about 0.15 of its potential returns per unit of risk. Altura Energy is currently generating about 0.17 per unit of risk. If you would invest  49.00  in Gear Energy on February 2, 2024 and sell it today you would earn a total of  5.00  from holding Gear Energy or generate 10.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Gear Energy  vs.  Altura Energy

Gear Energy

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gear Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Gear Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Altura Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altura Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Altura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gear Energy and Altura Energy

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

The idea behind Gear Energy and Altura 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.