Correlation Between Maple Leaf and Provident Financial
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Provident Financial 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 Maple Leaf and Provident Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maple Leaf Foods and Provident Financial Services, you can compare the effects of market volatilities on Maple Leaf and Provident Financial 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 Maple Leaf with a short position of Provident Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Provident Financial.
Diversification Opportunities for Maple Leaf and Provident Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Maple and Provident is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial and Maple Leaf 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 Maple Leaf Foods are associated (or correlated) with Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of Maple Leaf i.e., Maple Leaf and Provident Financial go up and down completely randomly.
Pair Corralation between Maple Leaf and Provident Financial
Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.9 times more return on investment than Provident Financial. However, Maple Leaf Foods is 1.11 times less risky than Provident Financial. It trades about 0.08 of its potential returns per unit of risk. Provident Financial Services is currently generating about -0.06 per unit of risk. If you would invest 1,370 in Maple Leaf Foods on November 3, 2024 and sell it today you would earn a total of 40.00 from holding Maple Leaf Foods or generate 2.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Maple Leaf Foods vs. Provident Financial Services
Performance |
| Timeline |
| Maple Leaf Foods |
| Provident Financial |
Maple Leaf and Provident Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Provident Financial
The main advantage of trading using opposite Maple Leaf and Provident Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, Provident Financial 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 Provident Financial will offset losses from the drop in Provident Financial's long position.| Maple Leaf vs. Yuexiu Transport Infrastructure | Maple Leaf vs. Indutrade AB | Maple Leaf vs. SALESFORCE INC CDR | Maple Leaf vs. Gold Road Resources |
| Provident Financial vs. PARKEN Sport Entertainment | Provident Financial vs. American Eagle Outfitters | Provident Financial vs. SOEDER SPORTFISKE AB | Provident Financial vs. SPORTING |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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