Correlation Between Freehold Royalties and Whitecap Resources
Can any of the company-specific risk be diversified away by investing in both Freehold Royalties and Whitecap Resources 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 Freehold Royalties and Whitecap Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freehold Royalties and Whitecap Resources, you can compare the effects of market volatilities on Freehold Royalties and Whitecap Resources 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 Freehold Royalties with a short position of Whitecap Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Whitecap Resources.
Diversification Opportunities for Freehold Royalties and Whitecap Resources
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Freehold and Whitecap is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap Resources and Freehold Royalties 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 Freehold Royalties are associated (or correlated) with Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Whitecap Resources go up and down completely randomly.
Pair Corralation between Freehold Royalties and Whitecap Resources
Assuming the 90 days horizon Freehold Royalties is expected to generate 3.16 times less return on investment than Whitecap Resources. But when comparing it to its historical volatility, Freehold Royalties is 1.22 times less risky than Whitecap Resources. It trades about 0.01 of its potential returns per unit of risk. Whitecap Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 691.00 in Whitecap Resources on August 26, 2024 and sell it today you would earn a total of 76.00 from holding Whitecap Resources or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freehold Royalties vs. Whitecap Resources
Performance |
| Timeline |
| Freehold Royalties |
| Whitecap Resources |
Freehold Royalties and Whitecap Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freehold Royalties and Whitecap Resources
The main advantage of trading using opposite Freehold Royalties and Whitecap Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties position performs unexpectedly, Whitecap Resources 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 Whitecap Resources will offset losses from the drop in Whitecap Resources' long position.| Freehold Royalties vs. Petroleo Brasileiro Petrobras | Freehold Royalties vs. Equinor ASA ADR | Freehold Royalties vs. Eni SpA ADR | Freehold Royalties vs. YPF Sociedad Anonima |
| Whitecap Resources vs. Petroleo Brasileiro Petrobras | Whitecap Resources vs. Equinor ASA ADR | Whitecap Resources vs. Eni SpA ADR | Whitecap Resources vs. YPF Sociedad Anonima |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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