Correlation Between Keyera Corp and Parex Resources

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

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

Diversification Opportunities for Keyera Corp and Parex Resources

0.37

Correlation Coefficient

Keyera Corp  Parex Resources

Weak diversification

The 3 months correlation between Keyera and Parex is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Keyera Corp and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of Keyera Corp i.e., Keyera Corp and Parex Resources go up and down completely randomly.

Pair Corralation between Keyera Corp and Parex Resources

Assuming the 90 days trading horizon Keyera Corp is expected to generate 0.62 times more return on investment than Parex Resources. However, Keyera Corp is 1.61 times less risky than Parex Resources. It trades about 0.04 of its potential returns per unit of risk. Parex Resources is currently generating about 0.02 per unit of risk. If you would invest  4,317  in Keyera Corp on December 29, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Keyera Corp  vs.  Parex Resources

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.

Parex Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parex Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Parex Resources 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 Parex Resources

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

The idea behind Keyera Corp and Parex Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.