Correlation Between Loblaw Companies and Open Text
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies and Open Text 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 Open Text 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 Open Text Corp, you can compare the effects of market volatilities on Loblaw Companies and Open Text 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 Open Text. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Open Text.
Diversification Opportunities for Loblaw Companies and Open Text
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Loblaw and Open is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text Corp 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 Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Open Text go up and down completely randomly.
Pair Corralation between Loblaw Companies and Open Text
Given the investment horizon of 90 days Loblaw Companies Limited is expected to under-perform the Open Text. But the stock apears to be less risky and, when comparing its historical volatility, Loblaw Companies Limited is 1.18 times less risky than Open Text. The stock trades about -0.17 of its potential returns per unit of risk. The Open Text Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,070 in Open Text Corp on November 3, 2024 and sell it today you would earn a total of 206.00 from holding Open Text Corp or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loblaw Companies Limited vs. Open Text Corp
Performance |
| Timeline |
| Loblaw Companies |
| Open Text Corp |
Loblaw Companies and Open Text Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loblaw Companies and Open Text
The main advantage of trading using opposite Loblaw Companies and Open Text positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies position performs unexpectedly, Open Text 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 Open Text will offset losses from the drop in Open Text's long position.| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
| Open Text vs. Rogers Communications | Open Text vs. MAG Silver Corp | Open Text vs. TGS Esports | Open Text vs. Verizon Communications CDR |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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