Correlation Between Loblaw Companies and Transcontinental
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies and Transcontinental 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 Transcontinental 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 Transcontinental, you can compare the effects of market volatilities on Loblaw Companies and Transcontinental 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 Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Transcontinental.
Diversification Opportunities for Loblaw Companies and Transcontinental
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Loblaw and Transcontinental is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Transcontinental go up and down completely randomly.
Pair Corralation between Loblaw Companies and Transcontinental
Given the investment horizon of 90 days Loblaw Companies is expected to generate 1.33 times less return on investment than Transcontinental. But when comparing it to its historical volatility, Loblaw Companies Limited is 1.45 times less risky than Transcontinental. It trades about 0.35 of its potential returns per unit of risk. Transcontinental is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,689 in Transcontinental on September 27, 2024 and sell it today you would earn a total of 164.00 from holding Transcontinental or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loblaw Companies Limited vs. Transcontinental
Performance |
| Timeline |
| Loblaw Companies |
| Transcontinental |
Loblaw Companies and Transcontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loblaw Companies and Transcontinental
The main advantage of trading using opposite Loblaw Companies and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies position performs unexpectedly, Transcontinental 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 Transcontinental will offset losses from the drop in Transcontinental's long position.| Loblaw Companies vs. Transcontinental | Loblaw Companies vs. Premium Brands Holdings | Loblaw Companies vs. Exchange Income | Loblaw Companies vs. ATCO |
| Transcontinental vs. Quebecor | Transcontinental vs. Restaurant Brands International | Transcontinental vs. ATCO |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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