Correlation Between Parkland Fuel and Keyera Corp

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

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

Diversification Opportunities for Parkland Fuel and Keyera Corp

0.05

Correlation Coefficient

Parkland Fuel  Keyera Corp

Significant diversification

The 3 months correlation between Parkland and Keyera is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Parkland Fuel and Keyera Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyera Corp 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 Keyera Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyera Corp has no effect on the direction of Parkland Fuel i.e., Parkland Fuel and Keyera Corp go up and down completely randomly.

Pair Corralation between Parkland Fuel and Keyera Corp

Assuming the 90 days trading horizon Parkland Fuel is expected to generate 1.71 times more return on investment than Keyera Corp. However, Parkland Fuel is 1.71 times more volatile than Keyera Corp. It trades about 0.09 of its potential returns per unit of risk. Keyera Corp is currently generating about 0.04 per unit of risk. If you would invest  3,195  in Parkland Fuel on December 30, 2024 and sell it today you would earn a total of  425.00  from holding Parkland Fuel or generate 13.3% return on investment over 90 days.

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

Parkland Fuel  vs.  Keyera Corp

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.

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.

Pair Trading with Parkland Fuel and Keyera Corp

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

The idea behind Parkland Fuel and Keyera Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.