Correlation Between Royal Helium and Stantec

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

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

Diversification Opportunities for Royal Helium and Stantec

-0.72

Correlation Coefficient

Royal Helium  Stantec

Pay attention - limited upside

The 3 months correlation between Royal and Stantec is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec and Royal Helium 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 Royal Helium are associated (or correlated) with Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Royal Helium i.e., Royal Helium and Stantec go up and down completely randomly.

Pair Corralation between Royal Helium and Stantec

Assuming the 90 days horizon Royal Helium is expected to generate 1.54 times less return on investment than Stantec. In addition to that, Royal Helium is 12.26 times more volatile than Stantec. It trades about 0.01 of its total potential returns per unit of risk. Stantec is currently generating about 0.17 per unit of volatility. If you would invest  11,555  in Stantec on September 12, 2024 and sell it today you would earn a total of  419.00  from holding Stantec or generate 3.63% return on investment over 90 days.

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

Royal Helium  vs.  Stantec

Royal Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Stantec

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Stantec displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and Stantec

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

The idea behind Royal Helium and Stantec 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.