Correlation Between Leons Furniture and Algoma Central
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Algoma Central 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 Leons Furniture and Algoma Central into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Algoma Central, you can compare the effects of market volatilities on Leons Furniture and Algoma Central 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 Leons Furniture with a short position of Algoma Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Algoma Central.
Diversification Opportunities for Leons Furniture and Algoma Central
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leons and Algoma is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of Leons Furniture i.e., Leons Furniture and Algoma Central go up and down completely randomly.
Pair Corralation between Leons Furniture and Algoma Central
Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Algoma Central. In addition to that, Leons Furniture is 1.35 times more volatile than Algoma Central. It trades about -0.16 of its total potential returns per unit of risk. Algoma Central is currently generating about -0.01 per unit of volatility. If you would invest 1,518 in Algoma Central on August 25, 2024 and sell it today you would lose (5.00) from holding Algoma Central or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Algoma Central
Performance |
| Timeline |
| Leons Furniture |
| Algoma Central |
Leons Furniture and Algoma Central Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Algoma Central
The main advantage of trading using opposite Leons Furniture and Algoma Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Algoma Central 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 Algoma Central will offset losses from the drop in Algoma Central's long position.| Leons Furniture vs. Restaurant Brands International | Leons Furniture vs. Enghouse Systems | Leons Furniture vs. Metro Inc | Leons Furniture vs. goeasy |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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