Correlation Between Maple Leaf and National Bank
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Maple Leaf and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and National Bank.
Diversification Opportunities for Maple Leaf and National Bank
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Maple and National is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Maple Leaf i.e., Maple Leaf and National Bank go up and down completely randomly.
Pair Corralation between Maple Leaf and National Bank
Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 5.63 times more return on investment than National Bank. However, Maple Leaf is 5.63 times more volatile than National Bank of. It trades about 0.07 of its potential returns per unit of risk. National Bank of is currently generating about -0.08 per unit of risk. If you would invest 2,051 in Maple Leaf Foods on October 20, 2024 and sell it today you would earn a total of 53.00 from holding Maple Leaf Foods or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maple Leaf Foods vs. National Bank of
Performance |
| Timeline |
| Maple Leaf Foods |
| National Bank |
Maple Leaf and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and National Bank
The main advantage of trading using opposite Maple Leaf and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's 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 |
| National Bank vs. Mako Mining Corp | National Bank vs. Guru Organic Energy | National Bank vs. Marimaca Copper Corp | National Bank vs. Maple Leaf Foods |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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