Correlation Between AltaGas and Parex Resources

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

By analyzing existing cross correlation between AltaGas and Parex Resources, you can compare the effects of market volatilities on AltaGas and Parex Resources 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 Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of AltaGas and Parex Resources.

Diversification Opportunities for AltaGas and Parex Resources

0.1

Correlation Coefficient

AltaGas  Parex Resources

Average diversification

The 3 months correlation between AltaGas and Parex is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AltaGas and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of AltaGas i.e., AltaGas and Parex Resources go up and down completely randomly.

Pair Corralation between AltaGas and Parex Resources

Assuming the 90 days trading horizon AltaGas is expected to generate 0.48 times more return on investment than Parex Resources. However, AltaGas is 2.06 times less risky than Parex Resources. It trades about 0.08 of its potential returns per unit of risk. Parex Resources is currently generating about 0.01 per unit of risk. If you would invest  2,244  in AltaGas on September 4, 2024 and sell it today you would earn a total of  1,217  from holding AltaGas or generate 54.23% return on investment over 90 days.

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

AltaGas  vs.  Parex Resources

AltaGas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 2 (%) 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.

Parex Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parex Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Parex Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AltaGas and Parex Resources

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

The idea behind AltaGas and Parex Resources 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.