Correlation Between Freehold Royalties and Tourmaline Oil
Can any of the company-specific risk be diversified away by investing in both Freehold Royalties and Tourmaline 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 Freehold Royalties and Tourmaline Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freehold Royalties and Tourmaline Oil Corp, you can compare the effects of market volatilities on Freehold Royalties and Tourmaline 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 Freehold Royalties with a short position of Tourmaline Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Tourmaline Oil.
Diversification Opportunities for Freehold Royalties and Tourmaline Oil
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Freehold and Tourmaline is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Tourmaline Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourmaline Oil Corp 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 Tourmaline Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourmaline Oil Corp has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Tourmaline Oil go up and down completely randomly.
Pair Corralation between Freehold Royalties and Tourmaline Oil
Assuming the 90 days horizon Freehold Royalties is expected to generate 1.79 times less return on investment than Tourmaline Oil. But when comparing it to its historical volatility, Freehold Royalties is 1.92 times less risky than Tourmaline Oil. It trades about 0.12 of its potential returns per unit of risk. Tourmaline Oil Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,518 in Tourmaline Oil Corp on September 2, 2024 and sell it today you would earn a total of 193.00 from holding Tourmaline Oil Corp or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freehold Royalties vs. Tourmaline Oil Corp
Performance |
| Timeline |
| Freehold Royalties |
| Tourmaline Oil Corp |
Freehold Royalties and Tourmaline Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freehold Royalties and Tourmaline Oil
The main advantage of trading using opposite Freehold Royalties and Tourmaline Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties position performs unexpectedly, Tourmaline 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 Tourmaline Oil will offset losses from the drop in Tourmaline Oil's long position.| Freehold Royalties vs. PrairieSky Royalty | Freehold Royalties vs. Tamarack Valley Energy | Freehold Royalties vs. MEG Energy Corp | Freehold Royalties vs. Tourmaline Oil Corp |
| Tourmaline Oil vs. PrairieSky Royalty | Tourmaline Oil vs. Tamarack Valley Energy | Tourmaline Oil vs. MEG Energy Corp | Tourmaline Oil vs. Cardinal Energy |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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