Correlation Between Freehold Royalties and ARC Resources

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

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

Diversification Opportunities for Freehold Royalties and ARC Resources

0.0

Correlation Coefficient

Freehold Royalties  ARC Resources

Pay attention - limited upside

The 3 months correlation between Freehold and ARC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and ARC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Resources and Freehold Royalties 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 Freehold Royalties are associated (or correlated) with ARC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Resources has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and ARC Resources go up and down completely randomly.

Pair Corralation between Freehold Royalties and ARC Resources

If you would invest (100.00) in ARC Resources on December 1, 2024 and sell it today you would earn a total of  100.00  from holding ARC Resources or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Freehold Royalties  vs.  ARC Resources

Freehold Royalties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freehold Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ARC Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARC Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ARC Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Freehold Royalties and ARC Resources

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

The idea behind Freehold Royalties and ARC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.