Correlation Between Keyera Corp and Capital Power

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

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

Diversification Opportunities for Keyera Corp and Capital Power

0.16

Correlation Coefficient

Keyera Corp  Capital Power

Average diversification

The 3 months correlation between Keyera and Capital is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Keyera Corp and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and Keyera Corp 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 Keyera Corp are associated (or correlated) with Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Keyera Corp i.e., Keyera Corp and Capital Power go up and down completely randomly.

Pair Corralation between Keyera Corp and Capital Power

Assuming the 90 days trading horizon Keyera Corp is expected to generate 0.48 times more return on investment than Capital Power. However, Keyera Corp is 2.08 times less risky than Capital Power. It trades about 0.04 of its potential returns per unit of risk. Capital Power is currently generating about -0.13 per unit of risk. If you would invest  4,317  in Keyera Corp on December 30, 2024 and sell it today you would earn a total of  131.00  from holding Keyera Corp or generate 3.03% return on investment over 90 days.

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

Keyera Corp  vs.  Capital Power

Keyera Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keyera Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Keyera Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Keyera Corp and Capital Power

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

The idea behind Keyera Corp and Capital Power 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.