Correlation Between PrairieSky Royalty and Gear Energy

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

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

Diversification Opportunities for PrairieSky Royalty and Gear Energy

-0.43

Correlation Coefficient

PrairieSky Royalty  Gear Energy

Very good diversification

The 3 months correlation between PrairieSky and Gear is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding PrairieSky Royalty and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and PrairieSky Royalty 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 PrairieSky Royalty are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of PrairieSky Royalty i.e., PrairieSky Royalty and Gear Energy go up and down completely randomly.

Pair Corralation between PrairieSky Royalty and Gear Energy

Assuming the 90 days trading horizon PrairieSky Royalty is expected to generate 0.46 times more return on investment than Gear Energy. However, PrairieSky Royalty is 2.16 times less risky than Gear Energy. It trades about 0.12 of its potential returns per unit of risk. Gear Energy is currently generating about -0.08 per unit of risk. If you would invest  2,626  in PrairieSky Royalty on September 13, 2024 and sell it today you would earn a total of  263.00  from holding PrairieSky Royalty or generate 10.02% return on investment over 90 days.

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

PrairieSky Royalty  vs.  Gear Energy

PrairieSky Royalty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PrairieSky Royalty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, PrairieSky Royalty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with PrairieSky Royalty and Gear Energy

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

The idea behind PrairieSky Royalty and Gear Energy 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.