Correlation Between Bank and SNDL
Can any of the company-specific risk be diversified away by investing in both Bank and SNDL 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 Bank and SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank and SNDL Inc, you can compare the effects of market volatilities on Bank and SNDL 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 Bank with a short position of SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank and SNDL.
Diversification Opportunities for Bank and SNDL
Average diversification
The 3 months correlation between Bank and SNDL is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bank and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc and Bank 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 Bank are associated (or correlated) with SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Bank i.e., Bank and SNDL go up and down completely randomly.
Pair Corralation between Bank and SNDL
Assuming the 90 days horizon Bank is expected to generate 0.28 times more return on investment than SNDL. However, Bank is 3.57 times less risky than SNDL. It trades about 0.18 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.04 per unit of risk. If you would invest 177.00 in Bank on August 31, 2024 and sell it today you would earn a total of 12.00 from holding Bank or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 8.29% |
| Values | Daily Returns |
Bank vs. SNDL Inc
Performance |
| Timeline |
| Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| SNDL Inc |
Bank and SNDL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank and SNDL
The main advantage of trading using opposite Bank and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL's long position.The idea behind Bank and SNDL Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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