Correlation Between Doman Building and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Doman Building and Maple Leaf 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 Doman Building and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Doman Building Materials and Maple Leaf Foods, you can compare the effects of market volatilities on Doman Building and Maple Leaf 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 Doman Building with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doman Building and Maple Leaf.
Diversification Opportunities for Doman Building and Maple Leaf
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Doman and Maple is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Doman Building 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 Doman Building Materials are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Doman Building i.e., Doman Building and Maple Leaf go up and down completely randomly.
Pair Corralation between Doman Building and Maple Leaf
Assuming the 90 days trading horizon Doman Building Materials is expected to under-perform the Maple Leaf. But the stock apears to be less risky and, when comparing its historical volatility, Doman Building Materials is 1.24 times less risky than Maple Leaf. The stock trades about -0.25 of its potential returns per unit of risk. The Maple Leaf Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,031 in Maple Leaf Foods on October 25, 2024 and sell it today you would earn a total of 112.00 from holding Maple Leaf Foods or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Doman Building Materials vs. Maple Leaf Foods
Performance |
| Timeline |
| Doman Building Materials |
| Maple Leaf Foods |
Doman Building and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Doman Building and Maple Leaf
The main advantage of trading using opposite Doman Building and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doman Building position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.| Doman Building vs. Toromont Industries | Doman Building vs. Ritchie Bros Auctioneers | Doman Building vs. Stantec | Doman Building vs. Transcontinental |
| Maple Leaf vs. Saputo Inc | Maple Leaf vs. George Weston Limited | Maple Leaf vs. Empire Company Limited | Maple Leaf vs. Premium Brands Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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