Correlation Between Canadian Tire and Enghouse Systems
Can any of the company-specific risk be diversified away by investing in both Canadian Tire and Enghouse Systems 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 Enghouse Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Tire and Enghouse Systems, you can compare the effects of market volatilities on Canadian Tire and Enghouse Systems 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 Enghouse Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Tire and Enghouse Systems.
Diversification Opportunities for Canadian Tire and Enghouse Systems
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Canadian and Enghouse is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Tire and Enghouse Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enghouse Systems 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 Enghouse Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enghouse Systems has no effect on the direction of Canadian Tire i.e., Canadian Tire and Enghouse Systems go up and down completely randomly.
Pair Corralation between Canadian Tire and Enghouse Systems
Assuming the 90 days trading horizon Canadian Tire is expected to generate 0.52 times more return on investment than Enghouse Systems. However, Canadian Tire is 1.93 times less risky than Enghouse Systems. It trades about 0.1 of its potential returns per unit of risk. Enghouse Systems is currently generating about -0.05 per unit of risk. If you would invest 15,629 in Canadian Tire on October 26, 2024 and sell it today you would earn a total of 1,042 from holding Canadian Tire or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Tire vs. Enghouse Systems
Performance |
| Timeline |
| Canadian Tire |
| Enghouse Systems |
Canadian Tire and Enghouse Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Tire and Enghouse Systems
The main advantage of trading using opposite Canadian Tire and Enghouse Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Tire position performs unexpectedly, Enghouse Systems 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 Enghouse Systems will offset losses from the drop in Enghouse Systems' long position.| Canadian Tire vs. Dollarama | Canadian Tire vs. Loblaw Companies Limited | Canadian Tire vs. Restaurant Brands International | Canadian Tire vs. Canadian National Railway |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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