Correlation Between Empire Company and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Empire Company and Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies Limited, you can compare the effects of market volatilities on Empire Company and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Company and Loblaw Companies.
Diversification Opportunities for Empire Company and Loblaw Companies
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Empire and Loblaw is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Empire Company Limited and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Empire Company i.e., Empire Company and Loblaw Companies go up and down completely randomly.
Pair Corralation between Empire Company and Loblaw Companies
Assuming the 90 days trading horizon Empire Company Limited is expected to generate 0.67 times more return on investment than Loblaw Companies. However, Empire Company Limited is 1.5 times less risky than Loblaw Companies. It trades about -0.17 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about -0.17 per unit of risk. If you would invest 4,400 in Empire Company Limited on November 3, 2024 and sell it today you would lose (126.00) from holding Empire Company Limited or give up 2.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire Company Limited vs. Loblaw Companies Limited
Performance |
| Timeline |
| Empire Limited |
| Loblaw Companies |
Empire Company and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire Company and Loblaw Companies
The main advantage of trading using opposite Empire Company and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Company position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| Empire Company vs. Metro Inc | Empire Company vs. George Weston Limited | Empire Company vs. Saputo Inc | Empire Company vs. Loblaw Companies Limited |
| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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