Correlation Between PrairieSky Royalty and Greenfire Resources

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

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

Diversification Opportunities for PrairieSky Royalty and Greenfire Resources

0.27

Correlation Coefficient

PrairieSky Royalty  Greenfire Resources

Modest diversification

The 3 months correlation between PrairieSky and Greenfire is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding PrairieSky Royalty and Greenfire Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenfire Resources 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 Greenfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenfire Resources has no effect on the direction of PrairieSky Royalty i.e., PrairieSky Royalty and Greenfire Resources go up and down completely randomly.

Pair Corralation between PrairieSky Royalty and Greenfire Resources

Assuming the 90 days trading horizon PrairieSky Royalty is expected to generate 0.48 times more return on investment than Greenfire Resources. However, PrairieSky Royalty is 2.08 times less risky than Greenfire Resources. It trades about -0.03 of its potential returns per unit of risk. Greenfire Resources is currently generating about -0.06 per unit of risk. If you would invest  2,923  in PrairieSky Royalty on September 16, 2024 and sell it today you would lose (24.00) from holding PrairieSky Royalty or give up 0.82% of portfolio value over 90 days.

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

PrairieSky Royalty  vs.  Greenfire Resources

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.

Greenfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PrairieSky Royalty and Greenfire Resources

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

The idea behind PrairieSky Royalty and Greenfire 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.