Correlation Between ARC Resources and Gibson Energy
Can any of the company-specific risk be diversified away by investing in both ARC Resources and Gibson 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 ARC Resources and Gibson Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARC Resources and Gibson Energy, you can compare the effects of market volatilities on ARC Resources and Gibson 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 ARC Resources with a short position of Gibson Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARC Resources and Gibson Energy.
Diversification Opportunities for ARC Resources and Gibson Energy
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ARC and Gibson is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and Gibson Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibson Energy and ARC Resources 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 ARC Resources are associated (or correlated) with Gibson Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibson Energy has no effect on the direction of ARC Resources i.e., ARC Resources and Gibson Energy go up and down completely randomly.
Pair Corralation between ARC Resources and Gibson Energy
Assuming the 90 days trading horizon ARC Resources is expected to generate 1.77 times more return on investment than Gibson Energy. However, ARC Resources is 1.77 times more volatile than Gibson Energy. It trades about 0.05 of its potential returns per unit of risk. Gibson Energy is currently generating about 0.08 per unit of risk. If you would invest 2,034 in ARC Resources on August 29, 2024 and sell it today you would earn a total of 517.00 from holding ARC Resources or generate 25.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARC Resources vs. Gibson Energy
Performance |
| Timeline |
| ARC Resources |
| Gibson Energy |
ARC Resources and Gibson Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARC Resources and Gibson Energy
The main advantage of trading using opposite ARC Resources and Gibson Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARC Resources position performs unexpectedly, Gibson 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 Gibson Energy will offset losses from the drop in Gibson Energy's long position.| ARC Resources vs. Tourmaline Oil Corp | ARC Resources vs. Whitecap Resources | ARC Resources vs. MEG Energy Corp | ARC Resources vs. Vermilion Energy |
| Gibson Energy vs. Keyera Corp | Gibson Energy vs. Parkland Fuel | Gibson Energy vs. Superior Plus Corp | Gibson Energy vs. AltaGas |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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