Correlation Between Advent Wireless and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both Advent Wireless and Laurentian Bank 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 Advent Wireless and Laurentian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advent Wireless and Laurentian Bank, you can compare the effects of market volatilities on Advent Wireless and Laurentian Bank 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 Advent Wireless with a short position of Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advent Wireless and Laurentian Bank.
Diversification Opportunities for Advent Wireless and Laurentian Bank
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Advent and Laurentian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Advent Wireless and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and Advent Wireless 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 Advent Wireless are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Advent Wireless i.e., Advent Wireless and Laurentian Bank go up and down completely randomly.
Pair Corralation between Advent Wireless and Laurentian Bank
Assuming the 90 days horizon Advent Wireless is expected to generate 1.6 times more return on investment than Laurentian Bank. However, Advent Wireless is 1.6 times more volatile than Laurentian Bank. It trades about 0.04 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.01 per unit of risk. If you would invest 54.00 in Advent Wireless on August 31, 2024 and sell it today you would earn a total of 29.00 from holding Advent Wireless or generate 53.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advent Wireless vs. Laurentian Bank
Performance |
| Timeline |
| Advent Wireless |
| Laurentian Bank |
Advent Wireless and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advent Wireless and Laurentian Bank
The main advantage of trading using opposite Advent Wireless and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advent Wireless position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.| Advent Wireless vs. Berkshire Hathaway CDR | Advent Wireless vs. JPMorgan Chase Co | Advent Wireless vs. Bank of America | Advent Wireless vs. Alphabet Inc CDR |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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