Correlation Between Leons Furniture and Western Investment
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Western Investment 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 Western Investment 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 Western Investment, you can compare the effects of market volatilities on Leons Furniture and Western Investment 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 Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Western Investment.
Diversification Opportunities for Leons Furniture and Western Investment
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leons and Western is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Leons Furniture i.e., Leons Furniture and Western Investment go up and down completely randomly.
Pair Corralation between Leons Furniture and Western Investment
Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Western Investment. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 2.58 times less risky than Western Investment. The stock trades about -0.18 of its potential returns per unit of risk. The Western Investment is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 46.00 in Western Investment on October 10, 2024 and sell it today you would earn a total of 17.00 from holding Western Investment or generate 36.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Western Investment
Performance |
| Timeline |
| Leons Furniture |
| Western Investment |
Leons Furniture and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Western Investment
The main advantage of trading using opposite Leons Furniture and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Western Investment vs. Titanium Transportation Group | Western Investment vs. Queens Road Capital | Western Investment vs. Quorum Information Technologies | Western Investment vs. Micron Technology, |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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