Correlation Between Freehold Royalties and Athabasca Oil

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

By analyzing existing cross correlation between Freehold Royalties and Athabasca Oil Corp, you can compare the effects of market volatilities on Freehold Royalties and Athabasca Oil 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 Athabasca Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Athabasca Oil.

Diversification Opportunities for Freehold Royalties and Athabasca Oil

0.61

Correlation Coefficient

Freehold Royalties  Athabasca Oil

Poor diversification

The 3 months correlation between Freehold and Athabasca is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil Corp 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 Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Athabasca Oil go up and down completely randomly.

Pair Corralation between Freehold Royalties and Athabasca Oil

Assuming the 90 days horizon Freehold Royalties is expected to generate 4.24 times less return on investment than Athabasca Oil. But when comparing it to its historical volatility, Freehold Royalties is 1.89 times less risky than Athabasca Oil. It trades about 0.03 of its potential returns per unit of risk. Athabasca Oil Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  359.00  in Athabasca Oil Corp on December 30, 2024 and sell it today you would earn a total of  26.00  from holding Athabasca Oil Corp or generate 7.24% return on investment over 90 days.

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

Freehold Royalties  vs.  Athabasca Oil Corp

Freehold Royalties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Freehold Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Athabasca Oil Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Athabasca Oil Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Athabasca Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Freehold Royalties and Athabasca Oil

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

The idea behind Freehold Royalties and Athabasca Oil Corp 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.