Correlation Between Maple Leaf and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Diamond Estates 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 Diamond Estates 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 Diamond Estates Wines, you can compare the effects of market volatilities on Maple Leaf and Diamond Estates 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 Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Diamond Estates.
Diversification Opportunities for Maple Leaf and Diamond Estates
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Maple and Diamond is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Maple Leaf i.e., Maple Leaf and Diamond Estates go up and down completely randomly.
Pair Corralation between Maple Leaf and Diamond Estates
Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the Diamond Estates. But the stock apears to be less risky and, when comparing its historical volatility, Maple Leaf Foods is 2.27 times less risky than Diamond Estates. The stock trades about -0.1 of its potential returns per unit of risk. The Diamond Estates Wines is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Diamond Estates Wines on November 3, 2024 and sell it today you would earn a total of 0.00 from holding Diamond Estates Wines or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maple Leaf Foods vs. Diamond Estates Wines
Performance |
| Timeline |
| Maple Leaf Foods |
| Diamond Estates Wines |
Maple Leaf and Diamond Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Diamond Estates
The main advantage of trading using opposite Maple Leaf and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.| Maple Leaf vs. Saputo Inc | Maple Leaf vs. George Weston Limited | Maple Leaf vs. Empire Company Limited | Maple Leaf vs. Premium Brands Holdings |
| Diamond Estates vs. Precision Drilling | Diamond Estates vs. Major Drilling Group | Diamond Estates vs. Canadian Imperial Bank | Diamond Estates vs. Dominion Lending Centres |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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