Correlation Between Parex Resources and Keyera Corp

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

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

Diversification Opportunities for Parex Resources and Keyera Corp

0.79

Correlation Coefficient

Parex Resources  Keyera Corp

Poor diversification

The 3 months correlation between Parex and Keyera is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Parex Resources and Keyera Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyera Corp and Parex Resources 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 Parex Resources 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 Parex Resources i.e., Parex Resources and Keyera Corp go up and down completely randomly.

Pair Corralation between Parex Resources and Keyera Corp

Assuming the 90 days trading horizon Parex Resources is expected to under-perform the Keyera Corp. In addition to that, Parex Resources is 2.85 times more volatile than Keyera Corp. It trades about -0.05 of its total potential returns per unit of risk. Keyera Corp is currently generating about 0.17 per unit of volatility. If you would invest  3,133  in Keyera Corp on September 4, 2024 and sell it today you would earn a total of  1,464  from holding Keyera Corp or generate 46.73% return on investment over 90 days.

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

Parex Resources  vs.  Keyera Corp

Parex Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parex Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Parex Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Keyera Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Keyera Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Keyera Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parex Resources and Keyera Corp

The main advantage of trading using opposite Parex Resources and Keyera Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parex Resources 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 Parex Resources 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.