Correlation Between Leons Furniture and Premium Brands
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Premium Brands 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 Premium Brands 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 Premium Brands Holdings, you can compare the effects of market volatilities on Leons Furniture and Premium Brands 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 Premium Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Premium Brands.
Diversification Opportunities for Leons Furniture and Premium Brands
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leons and Premium is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings 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 Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of Leons Furniture i.e., Leons Furniture and Premium Brands go up and down completely randomly.
Pair Corralation between Leons Furniture and Premium Brands
Assuming the 90 days trading horizon Leons Furniture Limited is expected to generate 0.61 times more return on investment than Premium Brands. However, Leons Furniture Limited is 1.64 times less risky than Premium Brands. It trades about -0.11 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about -0.29 per unit of risk. If you would invest 2,758 in Leons Furniture Limited on August 28, 2024 and sell it today you would lose (88.00) from holding Leons Furniture Limited or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Premium Brands Holdings
Performance |
| Timeline |
| Leons Furniture |
| Premium Brands Holdings |
Leons Furniture and Premium Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Premium Brands
The main advantage of trading using opposite Leons Furniture and Premium Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Premium Brands 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 Premium Brands will offset losses from the drop in Premium Brands' long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Premium Brands vs. CCL Industries | Premium Brands vs. North West | Premium Brands vs. Maple Leaf Foods | Premium Brands vs. FirstService 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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