Correlation Between Autocanada and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Autocanada and Leons Furniture 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 Autocanada and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autocanada and Leons Furniture Limited, you can compare the effects of market volatilities on Autocanada and Leons Furniture 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 Autocanada with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autocanada and Leons Furniture.
Diversification Opportunities for Autocanada and Leons Furniture
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Autocanada and Leons is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Autocanada and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Autocanada 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 Autocanada are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Autocanada i.e., Autocanada and Leons Furniture go up and down completely randomly.
Pair Corralation between Autocanada and Leons Furniture
Assuming the 90 days trading horizon Autocanada is expected to generate 4.52 times more return on investment than Leons Furniture. However, Autocanada is 4.52 times more volatile than Leons Furniture Limited. It trades about 0.22 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.11 per unit of risk. If you would invest 1,497 in Autocanada on August 28, 2024 and sell it today you would earn a total of 392.00 from holding Autocanada or generate 26.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autocanada vs. Leons Furniture Limited
Performance |
| Timeline |
| Autocanada |
| Leons Furniture |
Autocanada and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autocanada and Leons Furniture
The main advantage of trading using opposite Autocanada and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autocanada position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Autocanada vs. Martinrea International | Autocanada vs. Linamar | Autocanada vs. NFI Group | Autocanada vs. Element Fleet Management |
| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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