Correlation Between Canlan Ice and EDISON

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Can any of the company-specific risk be diversified away by investing in both Canlan Ice and EDISON 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 Canlan Ice and EDISON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canlan Ice Sports and EDISON INTL 4125, you can compare the effects of market volatilities on Canlan Ice and EDISON 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 Canlan Ice with a short position of EDISON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canlan Ice and EDISON.

Diversification Opportunities for Canlan Ice and EDISON

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Canlan and EDISON is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and EDISON INTL 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL 4125 and Canlan Ice 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 Canlan Ice Sports are associated (or correlated) with EDISON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDISON INTL 4125 has no effect on the direction of Canlan Ice i.e., Canlan Ice and EDISON go up and down completely randomly.

Pair Corralation between Canlan Ice and EDISON

Assuming the 90 days horizon Canlan Ice Sports is expected to generate 0.19 times more return on investment than EDISON. However, Canlan Ice Sports is 5.28 times less risky than EDISON. It trades about 0.14 of its potential returns per unit of risk. EDISON INTL 4125 is currently generating about -0.01 per unit of risk. If you would invest  286.00  in Canlan Ice Sports on September 14, 2024 and sell it today you would earn a total of  11.00  from holding Canlan Ice Sports or generate 3.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy97.98%
ValuesDaily Returns

Canlan Ice Sports  vs.  EDISON INTL 4125

 Performance 
       Timeline  
Canlan Ice Sports 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
EDISON INTL 4125 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EDISON INTL 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EDISON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Canlan Ice and EDISON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canlan Ice and EDISON

The main advantage of trading using opposite Canlan Ice and EDISON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice position performs unexpectedly, EDISON 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 EDISON will offset losses from the drop in EDISON's long position.
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The idea behind Canlan Ice Sports and EDISON INTL 4125 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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