Correlation Between Loblaw Companies and George Weston
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies and George Weston 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 Loblaw Companies and George Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loblaw Companies and George Weston 520, you can compare the effects of market volatilities on Loblaw Companies and George Weston 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 Loblaw Companies with a short position of George Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and George Weston.
Diversification Opportunities for Loblaw Companies and George Weston
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Loblaw and George is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies and George Weston 520 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Weston 520 and Loblaw Companies 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 Loblaw Companies are associated (or correlated) with George Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Weston 520 has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and George Weston go up and down completely randomly.
Pair Corralation between Loblaw Companies and George Weston
Assuming the 90 days trading horizon Loblaw Companies is expected to under-perform the George Weston. But the preferred stock apears to be less risky and, when comparing its historical volatility, Loblaw Companies is 2.43 times less risky than George Weston. The preferred stock trades about -0.27 of its potential returns per unit of risk. The George Weston 520 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,219 in George Weston 520 on October 25, 2024 and sell it today you would earn a total of 11.00 from holding George Weston 520 or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 52.63% |
| Values | Daily Returns |
Loblaw Companies vs. George Weston 520
Performance |
| Timeline |
| Loblaw Companies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| George Weston 520 |
Loblaw Companies and George Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loblaw Companies and George Weston
The main advantage of trading using opposite Loblaw Companies and George Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies position performs unexpectedly, George Weston 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 George Weston will offset losses from the drop in George Weston's long position.| Loblaw Companies vs. George Weston Prf | Loblaw Companies vs. George Weston Ser | Loblaw Companies vs. George Weston 520 | Loblaw Companies vs. George Weston 475 |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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