Correlation Between Leons Furniture and Themac Resources
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Themac 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 Leons Furniture and Themac Resources 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 Themac Resources Group, you can compare the effects of market volatilities on Leons Furniture and Themac 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 Leons Furniture with a short position of Themac Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Themac Resources.
Diversification Opportunities for Leons Furniture and Themac Resources
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leons and Themac is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Themac Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themac Resources 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 Themac Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themac Resources has no effect on the direction of Leons Furniture i.e., Leons Furniture and Themac Resources go up and down completely randomly.
Pair Corralation between Leons Furniture and Themac Resources
Assuming the 90 days trading horizon Leons Furniture is expected to generate 2.44 times less return on investment than Themac Resources. But when comparing it to its historical volatility, Leons Furniture Limited is 5.42 times less risky than Themac Resources. It trades about 0.09 of its potential returns per unit of risk. Themac Resources Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Themac Resources Group on September 2, 2024 and sell it today you would lose (1.00) from holding Themac Resources Group or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Themac Resources Group
Performance |
| Timeline |
| Leons Furniture |
| Themac Resources |
Leons Furniture and Themac Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Themac Resources
The main advantage of trading using opposite Leons Furniture and Themac Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Themac 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 Themac Resources will offset losses from the drop in Themac Resources' long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Themac Resources vs. Arbor Metals Corp | Themac Resources vs. Cogeco Communications | Themac Resources vs. Talon Metals Corp | Themac Resources vs. InPlay Oil 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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