Correlation Between Maple Leaf and Sparx Technology
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Sparx Technology 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 Sparx Technology 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 Sparx Technology, you can compare the effects of market volatilities on Maple Leaf and Sparx Technology 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 Sparx Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Sparx Technology.
Diversification Opportunities for Maple Leaf and Sparx Technology
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Maple and Sparx is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology 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 Sparx Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparx Technology has no effect on the direction of Maple Leaf i.e., Maple Leaf and Sparx Technology go up and down completely randomly.
Pair Corralation between Maple Leaf and Sparx Technology
Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the Sparx Technology. But the stock apears to be less risky and, when comparing its historical volatility, Maple Leaf Foods is 30.86 times less risky than Sparx Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Sparx Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Sparx Technology on August 31, 2024 and sell it today you would earn a total of 2,590 from holding Sparx Technology or generate 129500.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Maple Leaf Foods vs. Sparx Technology
Performance |
Timeline |
Maple Leaf Foods |
Sparx Technology |
Maple Leaf and Sparx Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Maple Leaf and Sparx Technology
The main advantage of trading using opposite Maple Leaf and Sparx Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, Sparx Technology 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 Sparx Technology will offset losses from the drop in Sparx Technology's long position.Maple Leaf vs. Saputo Inc | Maple Leaf vs. Forstrong Global Income | Maple Leaf vs. iShares Canadian HYBrid | Maple Leaf vs. Brompton European Dividend |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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