Correlation Between CN MODERN and WESCO International
Can any of the company-specific risk be diversified away by investing in both CN MODERN and WESCO International 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 CN MODERN and WESCO International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and WESCO International, you can compare the effects of market volatilities on CN MODERN and WESCO International 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 CN MODERN with a short position of WESCO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and WESCO International.
Diversification Opportunities for CN MODERN and WESCO International
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 07M and WESCO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and WESCO International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESCO International and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with WESCO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESCO International has no effect on the direction of CN MODERN i.e., CN MODERN and WESCO International go up and down completely randomly.
Pair Corralation between CN MODERN and WESCO International
Assuming the 90 days trading horizon CN MODERN is expected to generate 1.4 times less return on investment than WESCO International. In addition to that, CN MODERN is 1.14 times more volatile than WESCO International. It trades about 0.05 of its total potential returns per unit of risk. WESCO International is currently generating about 0.08 per unit of volatility. If you would invest 16,211 in WESCO International on September 3, 2024 and sell it today you would earn a total of 3,989 from holding WESCO International or generate 24.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. WESCO International
Performance |
| Timeline |
| CN MODERN DAIRY |
| WESCO International |
CN MODERN and WESCO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and WESCO International
The main advantage of trading using opposite CN MODERN and WESCO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, WESCO International 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 WESCO International will offset losses from the drop in WESCO International's long position.The idea behind CN MODERN DAIRY and WESCO International 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.| WESCO International vs. WATSCO INC B | WESCO International vs. Indutrade AB | WESCO International vs. Superior Plus Corp | WESCO International vs. NMI Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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