Correlation Between Canadian Utilities and Orogen Royalties
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Orogen Royalties 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 Canadian Utilities and Orogen Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Orogen Royalties, you can compare the effects of market volatilities on Canadian Utilities and Orogen Royalties 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 Canadian Utilities with a short position of Orogen Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Orogen Royalties.
Diversification Opportunities for Canadian Utilities and Orogen Royalties
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Canadian and Orogen is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Orogen Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orogen Royalties and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Orogen Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orogen Royalties has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Orogen Royalties go up and down completely randomly.
Pair Corralation between Canadian Utilities and Orogen Royalties
Assuming the 90 days horizon Canadian Utilities is expected to generate 1.16 times less return on investment than Orogen Royalties. But when comparing it to its historical volatility, Canadian Utilities Limited is 3.7 times less risky than Orogen Royalties. It trades about 0.19 of its potential returns per unit of risk. Orogen Royalties is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 111.00 in Orogen Royalties on September 14, 2024 and sell it today you would earn a total of 21.00 from holding Orogen Royalties or generate 18.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Orogen Royalties
Performance |
| Timeline |
| Canadian Utilities |
| Orogen Royalties |
Canadian Utilities and Orogen Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Orogen Royalties
The main advantage of trading using opposite Canadian Utilities and Orogen Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Orogen Royalties 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 Orogen Royalties will offset losses from the drop in Orogen Royalties' long position.| Canadian Utilities vs. Fortis Inc | Canadian Utilities vs. Emera Inc | Canadian Utilities vs. Algonquin Power Utilities | Canadian Utilities vs. ATCO |
| Orogen Royalties vs. Canlan Ice Sports | Orogen Royalties vs. Algonquin Power Utilities | Orogen Royalties vs. Nicola Mining | Orogen Royalties vs. Canadian Utilities Limited |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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