Correlation Between Leons Furniture and Transcontinental
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Transcontinental 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 Transcontinental 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 Transcontinental, you can compare the effects of market volatilities on Leons Furniture and Transcontinental 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 Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Transcontinental.
Diversification Opportunities for Leons Furniture and Transcontinental
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Leons and Transcontinental is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Leons Furniture i.e., Leons Furniture and Transcontinental go up and down completely randomly.
Pair Corralation between Leons Furniture and Transcontinental
Assuming the 90 days trading horizon Leons Furniture is expected to generate 1.34 times less return on investment than Transcontinental. But when comparing it to its historical volatility, Leons Furniture Limited is 1.86 times less risky than Transcontinental. It trades about 0.05 of its potential returns per unit of risk. Transcontinental is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,490 in Transcontinental on October 23, 2024 and sell it today you would earn a total of 335.00 from holding Transcontinental or generate 22.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.51% |
| Values | Daily Returns |
Leons Furniture Limited vs. Transcontinental
Performance |
| Timeline |
| Leons Furniture |
| Transcontinental |
Leons Furniture and Transcontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Transcontinental
The main advantage of trading using opposite Leons Furniture and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Transcontinental 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 Transcontinental will offset losses from the drop in Transcontinental's long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Transcontinental vs. Transcontinental | Transcontinental vs. TVA Group | Transcontinental vs. Quebecor | Transcontinental vs. Leons Furniture Limited |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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