Correlation Between Freehold Royalties and Gibson Energy
Can any of the company-specific risk be diversified away by investing in both Freehold Royalties 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 Freehold Royalties and Gibson Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freehold Royalties and Gibson Energy, you can compare the effects of market volatilities on Freehold Royalties 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 Freehold Royalties with a short position of Gibson Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Gibson Energy.
Diversification Opportunities for Freehold Royalties and Gibson Energy
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Freehold and Gibson is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Gibson Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibson Energy 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 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 Freehold Royalties i.e., Freehold Royalties and Gibson Energy go up and down completely randomly.
Pair Corralation between Freehold Royalties and Gibson Energy
Assuming the 90 days trading horizon Freehold Royalties is expected to generate 2.61 times less return on investment than Gibson Energy. In addition to that, Freehold Royalties is 1.22 times more volatile than Gibson Energy. It trades about 0.01 of its total potential returns per unit of risk. Gibson Energy is currently generating about 0.03 per unit of volatility. If you would invest 2,035 in Gibson Energy on August 26, 2024 and sell it today you would earn a total of 359.00 from holding Gibson Energy or generate 17.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freehold Royalties vs. Gibson Energy
Performance |
| Timeline |
| Freehold Royalties |
| Gibson Energy |
Freehold Royalties and Gibson Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freehold Royalties and Gibson Energy
The main advantage of trading using opposite Freehold Royalties and Gibson Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties 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.| Freehold Royalties vs. ARC Resources | Freehold Royalties vs. Whitecap Resources | Freehold Royalties vs. Peyto ExplorationDevelopment Corp | Freehold Royalties vs. Tourmaline Oil Corp |
| 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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