Correlation Between Freehold Royalties and Whitecap Resources

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

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

Diversification Opportunities for Freehold Royalties and Whitecap Resources

0.81

Correlation Coefficient

Freehold Royalties  Whitecap Resources

Very poor diversification

The 3 months correlation between Freehold and Whitecap is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap Resources and Freehold Royalties 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 Freehold Royalties are associated (or correlated) with Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Whitecap Resources go up and down completely randomly.

Pair Corralation between Freehold Royalties and Whitecap Resources

Assuming the 90 days horizon Freehold Royalties is expected to generate 0.69 times more return on investment than Whitecap Resources. However, Freehold Royalties is 1.45 times less risky than Whitecap Resources. It trades about 0.02 of its potential returns per unit of risk. Whitecap Resources is currently generating about 0.01 per unit of risk. If you would invest  983.00  in Freehold Royalties on September 1, 2024 and sell it today you would earn a total of  12.00  from holding Freehold Royalties or generate 1.22% return on investment over 90 days.

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

Freehold Royalties  vs.  Whitecap Resources

Freehold Royalties

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Freehold Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Whitecap Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitecap Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Whitecap Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Freehold Royalties and Whitecap Resources

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

The idea behind Freehold Royalties and Whitecap 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.