Correlation Between Gibson Energy and PrairieSky Royalty
Can any of the company-specific risk be diversified away by investing in both Gibson Energy and PrairieSky Royalty 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 Gibson Energy and PrairieSky Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gibson Energy and PrairieSky Royalty, you can compare the effects of market volatilities on Gibson Energy and PrairieSky Royalty 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 Gibson Energy with a short position of PrairieSky Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gibson Energy and PrairieSky Royalty.
Diversification Opportunities for Gibson Energy and PrairieSky Royalty
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gibson and PrairieSky is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gibson Energy and PrairieSky Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrairieSky Royalty and Gibson Energy 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 Gibson Energy are associated (or correlated) with PrairieSky Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrairieSky Royalty has no effect on the direction of Gibson Energy i.e., Gibson Energy and PrairieSky Royalty go up and down completely randomly.
Pair Corralation between Gibson Energy and PrairieSky Royalty
Assuming the 90 days trading horizon Gibson Energy is expected to generate 1.25 times less return on investment than PrairieSky Royalty. But when comparing it to its historical volatility, Gibson Energy is 1.41 times less risky than PrairieSky Royalty. It trades about 0.06 of its potential returns per unit of risk. PrairieSky Royalty is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,719 in PrairieSky Royalty on August 29, 2024 and sell it today you would earn a total of 254.00 from holding PrairieSky Royalty or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gibson Energy vs. PrairieSky Royalty
Performance |
| Timeline |
| Gibson Energy |
| PrairieSky Royalty |
Gibson Energy and PrairieSky Royalty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gibson Energy and PrairieSky Royalty
The main advantage of trading using opposite Gibson Energy and PrairieSky Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gibson Energy position performs unexpectedly, PrairieSky Royalty 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 PrairieSky Royalty will offset losses from the drop in PrairieSky Royalty's long position.| Gibson Energy vs. Keyera Corp | Gibson Energy vs. Parkland Fuel | Gibson Energy vs. Superior Plus Corp | Gibson Energy vs. AltaGas |
| PrairieSky Royalty vs. Parex Resources | PrairieSky Royalty vs. Gibson Energy | PrairieSky Royalty vs. Freehold Royalties | PrairieSky Royalty vs. ARC Resources |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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