Correlation Between Tourmaline Oil and Freehold Royalties
Can any of the company-specific risk be diversified away by investing in both Tourmaline Oil 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 Tourmaline Oil and Freehold Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tourmaline Oil Corp and Freehold Royalties, you can compare the effects of market volatilities on Tourmaline Oil 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 Tourmaline Oil with a short position of Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tourmaline Oil and Freehold Royalties.
Diversification Opportunities for Tourmaline Oil and Freehold Royalties
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tourmaline and Freehold is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tourmaline Oil Corp and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties and Tourmaline Oil 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 Tourmaline Oil Corp 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 Tourmaline Oil i.e., Tourmaline Oil and Freehold Royalties go up and down completely randomly.
Pair Corralation between Tourmaline Oil and Freehold Royalties
Assuming the 90 days trading horizon Tourmaline Oil Corp is expected to generate 1.45 times more return on investment than Freehold Royalties. However, Tourmaline Oil is 1.45 times more volatile than Freehold Royalties. It trades about 0.06 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.04 per unit of risk. If you would invest 5,515 in Tourmaline Oil Corp on August 29, 2024 and sell it today you would earn a total of 1,108 from holding Tourmaline Oil Corp or generate 20.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tourmaline Oil Corp vs. Freehold Royalties
Performance |
| Timeline |
| Tourmaline Oil Corp |
| Freehold Royalties |
Tourmaline Oil and Freehold Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tourmaline Oil and Freehold Royalties
The main advantage of trading using opposite Tourmaline Oil and Freehold Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tourmaline Oil 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.| Tourmaline Oil vs. ARC Resources | Tourmaline Oil vs. Whitecap Resources | Tourmaline Oil vs. MEG Energy Corp | Tourmaline Oil vs. Birchcliff Energy |
| Freehold Royalties vs. Canadian Natural Resources | Freehold Royalties vs. Suncor Energy | Freehold Royalties vs. iShares Canadian HYBrid | Freehold Royalties vs. Altagas Cum Red |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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