Correlation Between Leons Furniture and Advent Wireless
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Advent Wireless 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 Advent Wireless 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 Advent Wireless, you can compare the effects of market volatilities on Leons Furniture and Advent Wireless 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 Advent Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Advent Wireless.
Diversification Opportunities for Leons Furniture and Advent Wireless
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Leons and Advent is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless 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 Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of Leons Furniture i.e., Leons Furniture and Advent Wireless go up and down completely randomly.
Pair Corralation between Leons Furniture and Advent Wireless
Assuming the 90 days trading horizon Leons Furniture is expected to generate 1.11 times less return on investment than Advent Wireless. But when comparing it to its historical volatility, Leons Furniture Limited is 1.77 times less risky than Advent Wireless. It trades about 0.04 of its potential returns per unit of risk. Advent Wireless is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 59.00 in Advent Wireless on October 24, 2024 and sell it today you would earn a total of 6.00 from holding Advent Wireless or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Advent Wireless
Performance |
| Timeline |
| Leons Furniture |
| Advent Wireless |
Leons Furniture and Advent Wireless Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Advent Wireless
The main advantage of trading using opposite Leons Furniture and Advent Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Advent Wireless 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 Advent Wireless will offset losses from the drop in Advent Wireless' long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Advent Wireless vs. Canadian General Investments | Advent Wireless vs. CVS HEALTH CDR | Advent Wireless vs. Verizon Communications CDR | Advent Wireless vs. Leveljump Healthcare Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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