Correlation Between Parkland Fuel and Capital Power

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Can any of the company-specific risk be diversified away by investing in both Parkland Fuel and Capital Power 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 Parkland Fuel and Capital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parkland Fuel and Capital Power, you can compare the effects of market volatilities on Parkland Fuel and Capital Power 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 Parkland Fuel with a short position of Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parkland Fuel and Capital Power.

Diversification Opportunities for Parkland Fuel and Capital Power

ParklandCapitalDiversified AwayParklandCapitalDiversified Away100%
-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Parkland and Capital is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Parkland Fuel and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and Parkland Fuel 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 Parkland Fuel are associated (or correlated) with Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Parkland Fuel i.e., Parkland Fuel and Capital Power go up and down completely randomly.

Pair Corralation between Parkland Fuel and Capital Power

Assuming the 90 days trading horizon Parkland Fuel is expected to under-perform the Capital Power. But the stock apears to be less risky and, when comparing its historical volatility, Parkland Fuel is 1.14 times less risky than Capital Power. The stock trades about -0.01 of its potential returns per unit of risk. The Capital Power is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,632  in Capital Power on November 21, 2024 and sell it today you would earn a total of  1,695  from holding Capital Power or generate 46.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Parkland Fuel  vs.  Capital Power

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-5051015
JavaScript chart by amCharts 3.21.15PKI CPX
       Timeline  
Parkland Fuel 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Parkland Fuel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Parkland Fuel displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb303234363840
Capital Power 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Capital Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb50556065

Parkland Fuel and Capital Power Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.92-5.18-3.44-1.71-0.02891.793.645.57.359.2 0.020.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15PKI CPX
       Returns  

Pair Trading with Parkland Fuel and Capital Power

The main advantage of trading using opposite Parkland Fuel and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parkland Fuel position performs unexpectedly, Capital Power 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 Capital Power will offset losses from the drop in Capital Power's long position.
The idea behind Parkland Fuel and Capital Power pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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