Correlation Between Financial and Canadian Life
Can any of the company-specific risk be diversified away by investing in both Financial and Canadian Life 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 Financial and Canadian Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Canadian Life Companies, you can compare the effects of market volatilities on Financial and Canadian Life 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 Financial with a short position of Canadian Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Canadian Life.
Diversification Opportunities for Financial and Canadian Life
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Canadian is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies and Financial 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 Financial 15 Split are associated (or correlated) with Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Financial i.e., Financial and Canadian Life go up and down completely randomly.
Pair Corralation between Financial and Canadian Life
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.75 times more return on investment than Canadian Life. However, Financial 15 Split is 1.33 times less risky than Canadian Life. It trades about 0.28 of its potential returns per unit of risk. Canadian Life Companies is currently generating about 0.14 per unit of risk. If you would invest 905.00 in Financial 15 Split on November 5, 2024 and sell it today you would earn a total of 190.00 from holding Financial 15 Split or generate 20.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Canadian Life Companies
Performance |
| Timeline |
| Financial 15 Split |
| Canadian Life Companies |
Financial and Canadian Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Canadian Life
The main advantage of trading using opposite Financial and Canadian Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Canadian Life 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 Canadian Life will offset losses from the drop in Canadian Life's long position.| Financial vs. GOLDMAN SACHS CDR | Financial vs. Galaxy Digital Holdings | Financial vs. Hut 8 Mining | Financial vs. Bitfarms |
| Canadian Life vs. Brookfield | Canadian Life vs. Brookfield Asset Management | Canadian Life vs. Sprott Physical Gold | Canadian Life vs. IGM Financial |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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