Correlation Between Empire Company and High Liner
Can any of the company-specific risk be diversified away by investing in both Empire Company and High Liner 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 Empire Company and High Liner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire Company Limited and High Liner Foods, you can compare the effects of market volatilities on Empire Company and High Liner 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 Empire Company with a short position of High Liner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Company and High Liner.
Diversification Opportunities for Empire Company and High Liner
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Empire and High is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Empire Company Limited and High Liner Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Liner Foods and Empire Company 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 Empire Company Limited are associated (or correlated) with High Liner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Liner Foods has no effect on the direction of Empire Company i.e., Empire Company and High Liner go up and down completely randomly.
Pair Corralation between Empire Company and High Liner
Assuming the 90 days trading horizon Empire Company Limited is expected to generate 0.73 times more return on investment than High Liner. However, Empire Company Limited is 1.36 times less risky than High Liner. It trades about 0.05 of its potential returns per unit of risk. High Liner Foods is currently generating about 0.03 per unit of risk. If you would invest 3,440 in Empire Company Limited on September 26, 2024 and sell it today you would earn a total of 959.00 from holding Empire Company Limited or generate 27.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire Company Limited vs. High Liner Foods
Performance |
| Timeline |
| Empire Limited |
| High Liner Foods |
Empire Company and High Liner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire Company and High Liner
The main advantage of trading using opposite Empire Company and High Liner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Company position performs unexpectedly, High Liner 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 High Liner will offset losses from the drop in High Liner's long position.| Empire Company vs. Transcontinental | Empire Company vs. Premium Brands Holdings | Empire Company vs. Exchange Income | Empire Company vs. ATCO |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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