Correlation Between Keyera Corp and Extendicare

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

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

Diversification Opportunities for Keyera Corp and Extendicare

-0.3

Correlation Coefficient

Keyera Corp  Extendicare

Very good diversification

The 3 months correlation between Keyera and Extendicare is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Keyera Corp and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare 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 Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of Keyera Corp i.e., Keyera Corp and Extendicare go up and down completely randomly.

Pair Corralation between Keyera Corp and Extendicare

Assuming the 90 days trading horizon Keyera Corp is expected to generate 6.53 times less return on investment than Extendicare. But when comparing it to its historical volatility, Keyera Corp is 2.52 times less risky than Extendicare. It trades about 0.14 of its potential returns per unit of risk. Extendicare is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,031  in Extendicare on December 2, 2024 and sell it today you would earn a total of  210.00  from holding Extendicare or generate 20.37% return on investment over 90 days.

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

Keyera Corp  vs.  Extendicare

Keyera Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keyera Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Extendicare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Extendicare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Extendicare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keyera Corp and Extendicare

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

The idea behind Keyera Corp and Extendicare 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 Transaction History module to view history of all your transactions and understand their impact on performance.