Correlation Between MEG Energy and Imperial Oil

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

Diversification Opportunities for MEG Energy and Imperial Oil

0.86

Correlation Coefficient

MEG Energy  Imperial Oil

Very poor diversification

The 3 months correlation between MEG and Imperial is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MEG Energy Corp and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of MEG Energy i.e., MEG Energy and Imperial Oil go up and down completely randomly.

Pair Corralation between MEG Energy and Imperial Oil

Assuming the 90 days trading horizon MEG Energy Corp is expected to generate 2.2 times more return on investment than Imperial Oil. However, MEG Energy is 2.2 times more volatile than Imperial Oil. It trades about 0.16 of its potential returns per unit of risk. Imperial Oil is currently generating about 0.23 per unit of risk. If you would invest  2,058  in MEG Energy Corp on April 24, 2025 and sell it today you would earn a total of  608.00  from holding MEG Energy Corp or generate 29.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

MEG Energy Corp  vs.  Imperial Oil

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 12 (%) 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.

Imperial Oil

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Imperial Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MEG Energy and Imperial Oil

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

The idea behind MEG Energy Corp and Imperial Oil 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.