Correlation Between Aimia and PrairieSky Royalty

Can any of the company-specific risk be diversified away by investing in both Aimia 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 Aimia and PrairieSky Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aimia Inc and PrairieSky Royalty, you can compare the effects of market volatilities on Aimia 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 Aimia with a short position of PrairieSky Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aimia and PrairieSky Royalty.

Diversification Opportunities for Aimia and PrairieSky Royalty

0.7

Correlation Coefficient

Aimia  PrairieSky Royalty

Poor diversification

The 3 months correlation between Aimia and PrairieSky is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aimia Inc and PrairieSky Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrairieSky Royalty and Aimia 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 Aimia Inc 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 Aimia i.e., Aimia and PrairieSky Royalty go up and down completely randomly.

Pair Corralation between Aimia and PrairieSky Royalty

Assuming the 90 days trading horizon Aimia Inc is expected to generate 1.49 times more return on investment than PrairieSky Royalty. However, Aimia is 1.49 times more volatile than PrairieSky Royalty. It trades about -0.01 of its potential returns per unit of risk. PrairieSky Royalty is currently generating about -0.07 per unit of risk. If you would invest  264.00  in Aimia Inc on December 30, 2024 and sell it today you would lose (4.00) from holding Aimia Inc or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aimia Inc  vs.  PrairieSky Royalty

Aimia Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aimia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Aimia is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PrairieSky Royalty

Risk-Adjusted Performance

Very Weak

Over the last 90 days PrairieSky Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, PrairieSky Royalty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aimia and PrairieSky Royalty

The main advantage of trading using opposite Aimia and PrairieSky Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aimia 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.

The idea behind Aimia Inc and PrairieSky Royalty 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.