Correlation Between Journey Energy and Freehold Royalties

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

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

Diversification Opportunities for Journey Energy and Freehold Royalties

0.4

Correlation Coefficient

Journey Energy  Freehold Royalties

Very weak diversification

The 3 months correlation between Journey and Freehold is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Journey Energy and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties and Journey 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 Journey Energy are associated (or correlated) with Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Journey Energy i.e., Journey Energy and Freehold Royalties go up and down completely randomly.

Pair Corralation between Journey Energy and Freehold Royalties

Assuming the 90 days trading horizon Journey Energy is expected to under-perform the Freehold Royalties. In addition to that, Journey Energy is 2.23 times more volatile than Freehold Royalties. It trades about -0.13 of its total potential returns per unit of risk. Freehold Royalties is currently generating about -0.06 per unit of volatility. If you would invest  1,372  in Freehold Royalties on September 17, 2024 and sell it today you would lose (66.00) from holding Freehold Royalties or give up 4.81% of portfolio value over 90 days.

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

Journey Energy  vs.  Freehold Royalties

Journey Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Journey 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 basic 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.

Freehold Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freehold Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Freehold Royalties is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Journey Energy and Freehold Royalties

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

The idea behind Journey Energy and Freehold Royalties 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.