Correlation Between Keyera Corp and Freehold Royalties

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

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

Diversification Opportunities for Keyera Corp and Freehold Royalties

0.58

Correlation Coefficient

Keyera Corp  Freehold Royalties

Very weak diversification

The 3 months correlation between Keyera and Freehold is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Keyera Corp and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties 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 Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Keyera Corp i.e., Keyera Corp and Freehold Royalties go up and down completely randomly.

Pair Corralation between Keyera Corp and Freehold Royalties

Assuming the 90 days trading horizon Keyera Corp is expected to generate 1.2 times more return on investment than Freehold Royalties. However, Keyera Corp is 1.2 times more volatile than Freehold Royalties. It trades about 0.04 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.05 per unit of risk. If you would invest  4,317  in Keyera Corp on December 28, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Keyera Corp  vs.  Freehold Royalties

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.

Freehold Royalties

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Keyera Corp and Freehold Royalties

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

The idea behind Keyera Corp and Freehold Royalties 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.