Correlation Between AltaGas and Gibson Energy

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

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

Diversification Opportunities for AltaGas and Gibson Energy

-0.24

Correlation Coefficient

AltaGas  Gibson Energy

Very good diversification

The 3 months correlation between AltaGas and Gibson is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding AltaGas and Gibson Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibson Energy and AltaGas 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 AltaGas are associated (or correlated) with Gibson Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibson Energy has no effect on the direction of AltaGas i.e., AltaGas and Gibson Energy go up and down completely randomly.

Pair Corralation between AltaGas and Gibson Energy

Assuming the 90 days trading horizon AltaGas is expected to generate 0.94 times more return on investment than Gibson Energy. However, AltaGas is 1.07 times less risky than Gibson Energy. It trades about 0.1 of its potential returns per unit of risk. Gibson Energy is currently generating about 0.02 per unit of risk. If you would invest  2,158  in AltaGas on December 1, 2024 and sell it today you would earn a total of  1,387  from holding AltaGas or generate 64.27% return on investment over 90 days.

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

AltaGas  vs.  Gibson Energy

AltaGas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AltaGas is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Gibson Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gibson Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with AltaGas and Gibson Energy

The main advantage of trading using opposite AltaGas and Gibson Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AltaGas position performs unexpectedly, Gibson Energy 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 Gibson Energy will offset losses from the drop in Gibson Energy's long position.

The idea behind AltaGas and Gibson Energy 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.