Correlation Between Canfor and Richelieu Hardware
Can any of the company-specific risk be diversified away by investing in both Canfor and Richelieu Hardware 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 Canfor and Richelieu Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canfor and Richelieu Hardware, you can compare the effects of market volatilities on Canfor and Richelieu Hardware 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 Canfor with a short position of Richelieu Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canfor and Richelieu Hardware.
Diversification Opportunities for Canfor and Richelieu Hardware
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Canfor and Richelieu is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware and Canfor 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 Canfor are associated (or correlated) with Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Canfor i.e., Canfor and Richelieu Hardware go up and down completely randomly.
Pair Corralation between Canfor and Richelieu Hardware
Assuming the 90 days trading horizon Canfor is expected to generate 1.6 times more return on investment than Richelieu Hardware. However, Canfor is 1.6 times more volatile than Richelieu Hardware. It trades about -0.03 of its potential returns per unit of risk. Richelieu Hardware is currently generating about -0.5 per unit of risk. If you would invest 1,496 in Canfor on December 6, 2024 and sell it today you would lose (21.00) from holding Canfor or give up 1.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canfor vs. Richelieu Hardware
Performance |
| Timeline |
| Canfor |
| Richelieu Hardware |
Canfor and Richelieu Hardware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canfor and Richelieu Hardware
The main advantage of trading using opposite Canfor and Richelieu Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canfor position performs unexpectedly, Richelieu Hardware 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 Richelieu Hardware will offset losses from the drop in Richelieu Hardware's long position.| Canfor vs. Western Investment | Canfor vs. Maple Peak Investments | Canfor vs. Diversified Royalty Corp | Canfor vs. Rogers Communications |
| Richelieu Hardware vs. Stella Jones | Richelieu Hardware vs. Winpak | Richelieu Hardware vs. Stantec | Richelieu Hardware vs. Gildan Activewear |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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