Correlation Between Gibson Energy and PrairieSky Royalty

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

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

Diversification Opportunities for Gibson Energy and PrairieSky Royalty

0.59

Correlation Coefficient

Gibson Energy  PrairieSky Royalty

Very weak diversification

The 3 months correlation between Gibson and PrairieSky is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gibson Energy and PrairieSky Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrairieSky Royalty and Gibson Energy 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 Gibson Energy are associated (or correlated) with PrairieSky Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrairieSky Royalty has no effect on the direction of Gibson Energy i.e., Gibson Energy and PrairieSky Royalty go up and down completely randomly.

Pair Corralation between Gibson Energy and PrairieSky Royalty

Assuming the 90 days trading horizon Gibson Energy is expected to generate 1.0 times more return on investment than PrairieSky Royalty. However, Gibson Energy is 1.0 times more volatile than PrairieSky Royalty. It trades about 0.14 of its potential returns per unit of risk. PrairieSky Royalty is currently generating about 0.11 per unit of risk. If you would invest  2,200  in Gibson Energy on September 16, 2024 and sell it today you would earn a total of  268.00  from holding Gibson Energy or generate 12.18% return on investment over 90 days.

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

Gibson Energy  vs.  PrairieSky Royalty

Gibson Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gibson Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Gibson Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PrairieSky Royalty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PrairieSky Royalty are ranked lower than 8 (%) 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.

Pair Trading with Gibson Energy and PrairieSky Royalty

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

The idea behind Gibson Energy and PrairieSky Royalty 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.