Correlation Between Lords Company and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Lords Company and Maple Leaf 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 Lords Company and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lords Company Worldwide and Maple Leaf Green, you can compare the effects of market volatilities on Lords Company and Maple Leaf 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 Lords Company with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lords Company and Maple Leaf.
Diversification Opportunities for Lords Company and Maple Leaf
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lords and Maple is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lords Company Worldwide and Maple Leaf Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Green and Lords Company 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 Lords Company Worldwide are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Green has no effect on the direction of Lords Company i.e., Lords Company and Maple Leaf go up and down completely randomly.
Pair Corralation between Lords Company and Maple Leaf
Assuming the 90 days horizon Lords Company is expected to generate 1.45 times less return on investment than Maple Leaf. In addition to that, Lords Company is 1.46 times more volatile than Maple Leaf Green. It trades about 0.04 of its total potential returns per unit of risk. Maple Leaf Green is currently generating about 0.08 per unit of volatility. If you would invest 3.50 in Maple Leaf Green on August 29, 2024 and sell it today you would lose (0.11) from holding Maple Leaf Green or give up 3.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lords Company Worldwide vs. Maple Leaf Green
Performance |
| Timeline |
| Lords Worldwide |
| Maple Leaf Green |
Lords Company and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lords Company and Maple Leaf
The main advantage of trading using opposite Lords Company and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lords Company position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.The idea behind Lords Company Worldwide and Maple Leaf Green pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Maple Leaf vs. Rezolute | Maple Leaf vs. Tempest Therapeutics | Maple Leaf vs. Forte Biosciences | Maple Leaf vs. Dyadic International |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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