Correlation Between Maple Leaf and Rathdowney Resources
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Rathdowney Resources 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 Rathdowney Resources 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 Rathdowney Resources, you can compare the effects of market volatilities on Maple Leaf and Rathdowney Resources 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 Rathdowney Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Rathdowney Resources.
Diversification Opportunities for Maple Leaf and Rathdowney Resources
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Maple and Rathdowney is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Rathdowney Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rathdowney Resources 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 Rathdowney Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rathdowney Resources has no effect on the direction of Maple Leaf i.e., Maple Leaf and Rathdowney Resources go up and down completely randomly.
Pair Corralation between Maple Leaf and Rathdowney Resources
Assuming the 90 days trading horizon Maple Leaf is expected to generate 23.69 times less return on investment than Rathdowney Resources. But when comparing it to its historical volatility, Maple Leaf Foods is 6.18 times less risky than Rathdowney Resources. It trades about 0.01 of its potential returns per unit of risk. Rathdowney Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Rathdowney Resources on September 3, 2024 and sell it today you would lose (2.00) from holding Rathdowney Resources or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Maple Leaf Foods vs. Rathdowney Resources
Performance |
| Timeline |
| Maple Leaf Foods |
| Rathdowney Resources |
Maple Leaf and Rathdowney Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Rathdowney Resources
The main advantage of trading using opposite Maple Leaf and Rathdowney Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, Rathdowney Resources 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 Rathdowney Resources will offset losses from the drop in Rathdowney Resources' 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 |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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