Correlation Between Canadian Utilities and South Pacific
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and South Pacific 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 Utilities and South Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and South Pacific Metals, you can compare the effects of market volatilities on Canadian Utilities and South Pacific 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 Utilities with a short position of South Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and South Pacific.
Diversification Opportunities for Canadian Utilities and South Pacific
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Canadian and South is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific Metals and Canadian Utilities 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 Utilities Limited are associated (or correlated) with South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and South Pacific go up and down completely randomly.
Pair Corralation between Canadian Utilities and South Pacific
Assuming the 90 days horizon Canadian Utilities Limited is expected to under-perform the South Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Utilities Limited is 5.57 times less risky than South Pacific. The stock trades about -0.13 of its potential returns per unit of risk. The South Pacific Metals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 45.00 in South Pacific Metals on November 3, 2024 and sell it today you would earn a total of 4.00 from holding South Pacific Metals or generate 8.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. South Pacific Metals
Performance |
| Timeline |
| Canadian Utilities |
| South Pacific Metals |
Canadian Utilities and South Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and South Pacific
The main advantage of trading using opposite Canadian Utilities and South Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, South Pacific 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 South Pacific will offset losses from the drop in South Pacific's long position.| Canadian Utilities vs. Fortis Inc | Canadian Utilities vs. Emera Inc | Canadian Utilities vs. Algonquin Power Utilities | Canadian Utilities vs. ATCO |
| South Pacific vs. Newmont Goldcorp Corp | South Pacific vs. Agnico Eagle Mines | South Pacific vs. Barrick Gold Corp | South Pacific vs. Wheaton Precious Metals |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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