Correlation Between MEG Energy and Cardinal Energy

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

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

Diversification Opportunities for MEG Energy and Cardinal Energy

0.9

Correlation Coefficient

MEG Energy  Cardinal Energy

Almost no diversification

The 3 months correlation between MEG and Cardinal is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Energy and MEG 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 MEG Energy Corp are associated (or correlated) with Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of MEG Energy i.e., MEG Energy and Cardinal Energy go up and down completely randomly.

Pair Corralation between MEG Energy and Cardinal Energy

Assuming the 90 days trading horizon MEG Energy Corp is expected to generate 1.85 times more return on investment than Cardinal Energy. However, MEG Energy is 1.85 times more volatile than Cardinal Energy. It trades about 0.15 of its potential returns per unit of risk. Cardinal Energy is currently generating about 0.19 per unit of risk. If you would invest  2,059  in MEG Energy Corp on April 22, 2025 and sell it today you would earn a total of  595.00  from holding MEG Energy Corp or generate 28.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

MEG Energy Corp  vs.  Cardinal Energy

MEG Energy Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MEG Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, MEG Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cardinal Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MEG Energy and Cardinal Energy

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

The idea behind MEG Energy Corp and Cardinal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.