Correlation Between Whitecap Resources and Freehold Royalties
Can any of the company-specific risk be diversified away by investing in both Whitecap Resources and Freehold Royalties 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 Whitecap Resources and Freehold Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitecap Resources and Freehold Royalties, you can compare the effects of market volatilities on Whitecap Resources and Freehold Royalties 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 Whitecap Resources with a short position of Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitecap Resources and Freehold Royalties.
Diversification Opportunities for Whitecap Resources and Freehold Royalties
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Whitecap and Freehold is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap Resources and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties and Whitecap Resources 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 Whitecap Resources are associated (or correlated) with Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Whitecap Resources i.e., Whitecap Resources and Freehold Royalties go up and down completely randomly.
Pair Corralation between Whitecap Resources and Freehold Royalties
Assuming the 90 days horizon Whitecap Resources is expected to generate 1.22 times more return on investment than Freehold Royalties. However, Whitecap Resources is 1.22 times more volatile than Freehold Royalties. It trades about 0.02 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.01 per unit of risk. If you would invest 691.00 in Whitecap Resources on August 26, 2024 and sell it today you would earn a total of 76.00 from holding Whitecap Resources or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Whitecap Resources vs. Freehold Royalties
Performance |
| Timeline |
| Whitecap Resources |
| Freehold Royalties |
Whitecap Resources and Freehold Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whitecap Resources and Freehold Royalties
The main advantage of trading using opposite Whitecap Resources and Freehold Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitecap Resources position performs unexpectedly, Freehold Royalties 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 Freehold Royalties will offset losses from the drop in Freehold Royalties' long position.| Whitecap Resources vs. Petroleo Brasileiro Petrobras | Whitecap Resources vs. Equinor ASA ADR | Whitecap Resources vs. Eni SpA ADR | Whitecap Resources vs. YPF Sociedad Anonima |
| Freehold Royalties vs. Petroleo Brasileiro Petrobras | Freehold Royalties vs. Equinor ASA ADR | Freehold Royalties vs. Eni SpA ADR | Freehold Royalties vs. YPF Sociedad Anonima |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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