Correlation Between Loblaw Companies and Fortis
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies and Fortis 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 Fortis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loblaw Companies Limited and Fortis Inc, you can compare the effects of market volatilities on Loblaw Companies and Fortis 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 Fortis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Fortis.
Diversification Opportunities for Loblaw Companies and Fortis
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Loblaw and Fortis is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc 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 Limited are associated (or correlated) with Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Fortis go up and down completely randomly.
Pair Corralation between Loblaw Companies and Fortis
Given the investment horizon of 90 days Loblaw Companies is expected to generate 3.13 times less return on investment than Fortis. In addition to that, Loblaw Companies is 1.38 times more volatile than Fortis Inc. It trades about 0.06 of its total potential returns per unit of risk. Fortis Inc is currently generating about 0.24 per unit of volatility. If you would invest 6,037 in Fortis Inc on August 27, 2024 and sell it today you would earn a total of 276.00 from holding Fortis Inc or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loblaw Companies Limited vs. Fortis Inc
Performance |
| Timeline |
| Loblaw Companies |
| Fortis Inc |
Loblaw Companies and Fortis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loblaw Companies and Fortis
The main advantage of trading using opposite Loblaw Companies and Fortis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies position performs unexpectedly, Fortis 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 Fortis will offset losses from the drop in Fortis' long position.| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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