Correlation Between Capital Power and Parkland Fuel

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

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

Diversification Opportunities for Capital Power and Parkland Fuel

-0.54

Correlation Coefficient

Capital Power  Parkland Fuel

Excellent diversification

The 3 months correlation between Capital and Parkland is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and Parkland Fuel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkland Fuel and Capital Power 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 Capital Power are associated (or correlated) with Parkland Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkland Fuel has no effect on the direction of Capital Power i.e., Capital Power and Parkland Fuel go up and down completely randomly.

Pair Corralation between Capital Power and Parkland Fuel

Assuming the 90 days trading horizon Capital Power is expected to under-perform the Parkland Fuel. In addition to that, Capital Power is 1.21 times more volatile than Parkland Fuel. It trades about -0.13 of its total potential returns per unit of risk. Parkland Fuel is currently generating about 0.09 per unit of volatility. If you would invest  3,195  in Parkland Fuel on December 30, 2024 and sell it today you would earn a total of  425.00  from holding Parkland Fuel or generate 13.3% return on investment over 90 days.

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

Capital Power  vs.  Parkland Fuel

Capital Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Parkland Fuel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parkland Fuel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Parkland Fuel displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Power and Parkland Fuel

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

The idea behind Capital Power and Parkland Fuel 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.