Correlation Between Canadian Tire and Abaxx Technologies

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

Diversification Opportunities for Canadian Tire and Abaxx Technologies

CanadianAbaxxDiversified AwayCanadianAbaxxDiversified Away100%
0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Canadian and Abaxx is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Tire and Abaxx Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abaxx Technologies and Canadian Tire 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 Canadian Tire are associated (or correlated) with Abaxx Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abaxx Technologies has no effect on the direction of Canadian Tire i.e., Canadian Tire and Abaxx Technologies go up and down completely randomly.

Pair Corralation between Canadian Tire and Abaxx Technologies

Assuming the 90 days trading horizon Canadian Tire is expected to under-perform the Abaxx Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Tire is 1.25 times less risky than Abaxx Technologies. The stock trades about -0.15 of its potential returns per unit of risk. The Abaxx Technologies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,128  in Abaxx Technologies on November 23, 2024 and sell it today you would lose (13.00) from holding Abaxx Technologies or give up 1.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Canadian Tire  vs.  Abaxx Technologies

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-15-10-5051015
JavaScript chart by amCharts 3.21.15CTC-A ABXX
       Timeline  
Canadian Tire 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Canadian Tire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Tire is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb140145150155160165
Abaxx Technologies 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Abaxx Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1010.51111.51212.5

Canadian Tire and Abaxx Technologies Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.67-2.0-1.33-0.66-0.0110.641.31.962.623.28 0.060.080.100.120.14
JavaScript chart by amCharts 3.21.15CTC-A ABXX
       Returns  

Pair Trading with Canadian Tire and Abaxx Technologies

The main advantage of trading using opposite Canadian Tire and Abaxx Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Tire position performs unexpectedly, Abaxx Technologies 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 Abaxx Technologies will offset losses from the drop in Abaxx Technologies' long position.
The idea behind Canadian Tire and Abaxx Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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