Correlation Between Maple Leaf and Visa
Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Visa 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 Visa 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 Visa Inc CDR, you can compare the effects of market volatilities on Maple Leaf and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Visa.
Diversification Opportunities for Maple Leaf and Visa
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Maple and Visa is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Visa Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc CDR 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc CDR has no effect on the direction of Maple Leaf i.e., Maple Leaf and Visa go up and down completely randomly.
Pair Corralation between Maple Leaf and Visa
Assuming the 90 days trading horizon Maple Leaf is expected to generate 1.41 times less return on investment than Visa. In addition to that, Maple Leaf is 1.59 times more volatile than Visa Inc CDR. It trades about 0.17 of its total potential returns per unit of risk. Visa Inc CDR is currently generating about 0.39 per unit of volatility. If you would invest 2,679 in Visa Inc CDR on August 30, 2024 and sell it today you would earn a total of 311.00 from holding Visa Inc CDR or generate 11.61% 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. Visa Inc CDR
Performance |
| Timeline |
| Maple Leaf Foods |
| Visa Inc CDR |
Maple Leaf and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Visa
The main advantage of trading using opposite Maple Leaf and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Maple Leaf vs. Leons Furniture Limited | Maple Leaf vs. Autocanada | Maple Leaf vs. Premium Brands Holdings | Maple Leaf vs. Exco Technologies Limited |
| Visa vs. Summa Silver Corp | Visa vs. Aya Gold Silver | Visa vs. Canadian Utilities Limited | Visa vs. Sangoma Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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