Correlation Between Freehold Royalties and Exchange Income
Can any of the company-specific risk be diversified away by investing in both Freehold Royalties and Exchange Income 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 Exchange Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freehold Royalties and Exchange Income, you can compare the effects of market volatilities on Freehold Royalties and Exchange Income 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 Exchange Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Exchange Income.
Diversification Opportunities for Freehold Royalties and Exchange Income
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Freehold and Exchange is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income 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 Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Exchange Income go up and down completely randomly.
Pair Corralation between Freehold Royalties and Exchange Income
Assuming the 90 days trading horizon Freehold Royalties is expected to generate 5.03 times less return on investment than Exchange Income. In addition to that, Freehold Royalties is 1.07 times more volatile than Exchange Income. It trades about 0.04 of its total potential returns per unit of risk. Exchange Income is currently generating about 0.21 per unit of volatility. If you would invest 4,361 in Exchange Income on September 1, 2024 and sell it today you would earn a total of 1,318 from holding Exchange Income or generate 30.22% 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. Exchange Income
Performance |
| Timeline |
| Freehold Royalties |
| Exchange Income |
Freehold Royalties and Exchange Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freehold Royalties and Exchange Income
The main advantage of trading using opposite Freehold Royalties and Exchange Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties position performs unexpectedly, Exchange Income 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 Exchange Income will offset losses from the drop in Exchange Income's long position.| Freehold Royalties vs. ARC Resources | Freehold Royalties vs. Whitecap Resources | Freehold Royalties vs. Peyto ExplorationDevelopment Corp | Freehold Royalties vs. Tourmaline Oil Corp |
| Exchange Income vs. Capital Power | Exchange Income vs. Keyera Corp | Exchange Income vs. Parkland Fuel | Exchange Income vs. TFI International |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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