Correlation Between Laurentian Bank and Sienna Resources
Can any of the company-specific risk be diversified away by investing in both Laurentian Bank and Sienna Resources 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 Laurentian Bank and Sienna Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laurentian Bank and Sienna Resources, you can compare the effects of market volatilities on Laurentian Bank and Sienna Resources 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 Laurentian Bank with a short position of Sienna Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and Sienna Resources.
Diversification Opportunities for Laurentian Bank and Sienna Resources
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Laurentian and Sienna is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and Sienna Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Resources and Laurentian Bank 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 Laurentian Bank are associated (or correlated) with Sienna Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Resources has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and Sienna Resources go up and down completely randomly.
Pair Corralation between Laurentian Bank and Sienna Resources
Assuming the 90 days horizon Laurentian Bank is expected to generate 21.86 times less return on investment than Sienna Resources. But when comparing it to its historical volatility, Laurentian Bank is 8.72 times less risky than Sienna Resources. It trades about 0.02 of its potential returns per unit of risk. Sienna Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Sienna Resources on December 12, 2024 and sell it today you would earn a total of 0.50 from holding Sienna Resources or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laurentian Bank vs. Sienna Resources
Performance |
| Timeline |
| Laurentian Bank |
| Sienna Resources |
Laurentian Bank and Sienna Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laurentian Bank and Sienna Resources
The main advantage of trading using opposite Laurentian Bank and Sienna Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank position performs unexpectedly, Sienna Resources 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 Sienna Resources will offset losses from the drop in Sienna Resources' long position.| Laurentian Bank vs. National Bank of | ||
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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