Correlation Between US Financial and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both US Financial and Laurentian Bank 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 US Financial and Laurentian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Financial 15 and Laurentian Bank, you can compare the effects of market volatilities on US Financial and Laurentian Bank 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 US Financial with a short position of Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Laurentian Bank.
Diversification Opportunities for US Financial and Laurentian Bank
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FTU-PB and Laurentian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and US 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 US Financial 15 are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of US Financial i.e., US Financial and Laurentian Bank go up and down completely randomly.
Pair Corralation between US Financial and Laurentian Bank
Assuming the 90 days trading horizon US Financial is expected to generate 1.78 times less return on investment than Laurentian Bank. In addition to that, US Financial is 2.44 times more volatile than Laurentian Bank. It trades about 0.09 of its total potential returns per unit of risk. Laurentian Bank is currently generating about 0.4 per unit of volatility. If you would invest 2,658 in Laurentian Bank on August 28, 2024 and sell it today you would earn a total of 271.00 from holding Laurentian Bank or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Financial 15 vs. Laurentian Bank
Performance |
| Timeline |
| US Financial 15 |
| Laurentian Bank |
US Financial and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Financial and Laurentian Bank
The main advantage of trading using opposite US Financial and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.| US Financial vs. Forstrong Global Income | US Financial vs. BMO Aggregate Bond | US Financial vs. Terreno Resources Corp | US Financial vs. iShares Canadian HYBrid |
| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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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