Correlation Between Great West and Richelieu Hardware
Can any of the company-specific risk be diversified away by investing in both Great West and Richelieu Hardware 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 Great West and Richelieu Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Lifeco and Richelieu Hardware, you can compare the effects of market volatilities on Great West and Richelieu Hardware 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 Great West with a short position of Richelieu Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Richelieu Hardware.
Diversification Opportunities for Great West and Richelieu Hardware
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Great and Richelieu is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware and Great West 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 Great West Lifeco are associated (or correlated) with Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Great West i.e., Great West and Richelieu Hardware go up and down completely randomly.
Pair Corralation between Great West and Richelieu Hardware
Assuming the 90 days trading horizon Great West Lifeco is expected to under-perform the Richelieu Hardware. But the preferred stock apears to be less risky and, when comparing its historical volatility, Great West Lifeco is 2.47 times less risky than Richelieu Hardware. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Richelieu Hardware is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,856 in Richelieu Hardware on September 3, 2024 and sell it today you would earn a total of 252.00 from holding Richelieu Hardware or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Lifeco vs. Richelieu Hardware
Performance |
| Timeline |
| Great West Lifeco |
| Richelieu Hardware |
Great West and Richelieu Hardware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great West and Richelieu Hardware
The main advantage of trading using opposite Great West and Richelieu Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West position performs unexpectedly, Richelieu Hardware 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 Richelieu Hardware will offset losses from the drop in Richelieu Hardware's long position.| Great West vs. VIP Entertainment Technologies | Great West vs. Precision Drilling | Great West vs. AKITA Drilling | Great West vs. Pembina Pipeline Corp |
| Richelieu Hardware vs. Stella Jones | Richelieu Hardware vs. Winpak | Richelieu Hardware vs. Stantec | Richelieu Hardware vs. Gildan Activewear |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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