Correlation Between Maple Leaf and Nutrien
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Nutrien 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 Nutrien 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 Nutrien, you can compare the effects of market volatilities on Maple Leaf and Nutrien 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 Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Nutrien.
Diversification Opportunities for Maple Leaf and Nutrien
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Maple and Nutrien is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Maple Leaf i.e., Maple Leaf and Nutrien go up and down completely randomly.
Pair Corralation between Maple Leaf and Nutrien
Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 1.04 times more return on investment than Nutrien. However, Maple Leaf is 1.04 times more volatile than Nutrien. It trades about 0.01 of its potential returns per unit of risk. Nutrien is currently generating about -0.04 per unit of risk. If you would invest 2,279 in Maple Leaf Foods on August 26, 2024 and sell it today you would lose (17.00) from holding Maple Leaf Foods or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maple Leaf Foods vs. Nutrien
Performance |
| Timeline |
| Maple Leaf Foods |
| Nutrien |
Maple Leaf and Nutrien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Nutrien
The main advantage of trading using opposite Maple Leaf and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, Nutrien 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 Nutrien will offset losses from the drop in Nutrien'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 |
| Nutrien vs. Brookfield Investments | Nutrien vs. Maple Leaf Foods | Nutrien vs. Maple Peak Investments | Nutrien vs. Bip Investment Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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