Correlation Between Whitecap Resources and PrairieSky Royalty
Can any of the company-specific risk be diversified away by investing in both Whitecap Resources 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 Whitecap Resources and PrairieSky Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitecap Resources and PrairieSky Royalty, you can compare the effects of market volatilities on Whitecap Resources 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 Whitecap Resources with a short position of PrairieSky Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitecap Resources and PrairieSky Royalty.
Diversification Opportunities for Whitecap Resources and PrairieSky Royalty
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Whitecap and PrairieSky is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap Resources and PrairieSky Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrairieSky Royalty 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 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 Whitecap Resources i.e., Whitecap Resources and PrairieSky Royalty go up and down completely randomly.
Pair Corralation between Whitecap Resources and PrairieSky Royalty
Assuming the 90 days horizon Whitecap Resources is expected to under-perform the PrairieSky Royalty. But the pink sheet apears to be less risky and, when comparing its historical volatility, Whitecap Resources is 1.16 times less risky than PrairieSky Royalty. The pink sheet trades about -0.05 of its potential returns per unit of risk. The PrairieSky Royalty is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,005 in PrairieSky Royalty on August 30, 2024 and sell it today you would earn a total of 106.00 from holding PrairieSky Royalty or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Whitecap Resources vs. PrairieSky Royalty
Performance |
| Timeline |
| Whitecap Resources |
| PrairieSky Royalty |
Whitecap Resources and PrairieSky Royalty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whitecap Resources and PrairieSky Royalty
The main advantage of trading using opposite Whitecap Resources and PrairieSky Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitecap Resources 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.| Whitecap Resources vs. Athabasca Oil Corp | Whitecap Resources vs. Headwater Exploration | Whitecap Resources vs. Tamarack Valley Energy | Whitecap Resources vs. Birchcliff Energy |
| PrairieSky Royalty vs. Tamarack Valley Energy | PrairieSky Royalty vs. MEG Energy Corp | PrairieSky Royalty vs. Tourmaline Oil Corp | PrairieSky Royalty vs. Cardinal Energy |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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