Correlation Between Parkland Fuel and AltaGas

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

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

Diversification Opportunities for Parkland Fuel and AltaGas

0.54

Correlation Coefficient

Parkland Fuel  AltaGas

Very weak diversification

The 3 months correlation between Parkland and AltaGas is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Parkland Fuel and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas and Parkland Fuel 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 Parkland Fuel are associated (or correlated) with AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Parkland Fuel i.e., Parkland Fuel and AltaGas go up and down completely randomly.

Pair Corralation between Parkland Fuel and AltaGas

Assuming the 90 days trading horizon Parkland Fuel is expected to generate 1.16 times less return on investment than AltaGas. In addition to that, Parkland Fuel is 2.11 times more volatile than AltaGas. It trades about 0.09 of its total potential returns per unit of risk. AltaGas is currently generating about 0.23 per unit of volatility. If you would invest  3,322  in AltaGas on December 30, 2024 and sell it today you would earn a total of  577.00  from holding AltaGas or generate 17.37% return on investment over 90 days.

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

Parkland Fuel  vs.  AltaGas

Parkland Fuel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parkland Fuel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Parkland Fuel displayed solid returns over the last few months and may actually be approaching a breakup point.

AltaGas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AltaGas displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parkland Fuel and AltaGas

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

The idea behind Parkland Fuel and AltaGas 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.