Correlation Between Dairy Farm and Dollarama
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and Dollarama 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 Dairy Farm and Dollarama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and Dollarama, you can compare the effects of market volatilities on Dairy Farm and Dollarama 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 Dairy Farm with a short position of Dollarama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Dollarama.
Diversification Opportunities for Dairy Farm and Dollarama
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dairy and Dollarama is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and Dairy Farm 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 Dairy Farm International are associated (or correlated) with Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Dairy Farm i.e., Dairy Farm and Dollarama go up and down completely randomly.
Pair Corralation between Dairy Farm and Dollarama
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Dollarama. In addition to that, Dairy Farm is 1.72 times more volatile than Dollarama. It trades about -0.14 of its total potential returns per unit of risk. Dollarama is currently generating about -0.03 per unit of volatility. If you would invest 9,433 in Dollarama on November 1, 2024 and sell it today you would lose (67.00) from holding Dollarama or give up 0.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. Dollarama
Performance |
| Timeline |
| Dairy Farm International |
| Dollarama |
Dairy Farm and Dollarama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Dollarama
The main advantage of trading using opposite Dairy Farm and Dollarama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, Dollarama 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 Dollarama will offset losses from the drop in Dollarama's long position.| Dairy Farm vs. USWE SPORTS AB | Dairy Farm vs. SPORT LISBOA E | Dairy Farm vs. PNC Financial Services | Dairy Farm vs. Mitsui Chemicals |
| Dollarama vs. Dairy Farm International | Dollarama vs. Algonquin Power Utilities | Dollarama vs. Tokyu Construction Co | Dollarama vs. Xiwang Special Steel |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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