Correlation Between Freehold Royalties and InPlay Oil

Can any of the company-specific risk be diversified away by investing in both Freehold Royalties and InPlay 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 InPlay 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 InPlay Oil Corp, you can compare the effects of market volatilities on Freehold Royalties and InPlay 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 InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and InPlay Oil.

Diversification Opportunities for Freehold Royalties and InPlay Oil

0.23

Correlation Coefficient

Freehold Royalties  InPlay Oil

Modest diversification

The 3 months correlation between Freehold and InPlay is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and InPlay Oil go up and down completely randomly.

Pair Corralation between Freehold Royalties and InPlay Oil

Assuming the 90 days horizon Freehold Royalties is expected to generate 0.59 times more return on investment than InPlay Oil. However, Freehold Royalties is 1.68 times less risky than InPlay Oil. It trades about 0.02 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.11 per unit of risk. If you would invest  983.00  in Freehold Royalties on September 3, 2024 and sell it today you would earn a total of  13.00  from holding Freehold Royalties or generate 1.32% return on investment over 90 days.

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

Freehold Royalties  vs.  InPlay Oil Corp

Freehold Royalties

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 1 (%) 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.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Freehold Royalties and InPlay Oil

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

The idea behind Freehold Royalties and InPlay 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.