Correlation Between Metro and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Metro and Maple Leaf 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 Metro and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Inc and Maple Leaf Foods, you can compare the effects of market volatilities on Metro and Maple Leaf 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 Metro with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and Maple Leaf.
Diversification Opportunities for Metro and Maple Leaf
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metro and Maple is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Metro 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 Metro Inc are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Metro i.e., Metro and Maple Leaf go up and down completely randomly.
Pair Corralation between Metro and Maple Leaf
Assuming the 90 days trading horizon Metro Inc is expected to generate 0.45 times more return on investment than Maple Leaf. However, Metro Inc is 2.22 times less risky than Maple Leaf. It trades about 0.48 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.15 per unit of risk. If you would invest 8,291 in Metro Inc on September 2, 2024 and sell it today you would earn a total of 832.00 from holding Metro Inc or generate 10.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Inc vs. Maple Leaf Foods
Performance |
| Timeline |
| Metro Inc |
| Maple Leaf Foods |
Metro and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro and Maple Leaf
The main advantage of trading using opposite Metro and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
| Maple Leaf vs. Saputo Inc | Maple Leaf vs. George Weston Limited | Maple Leaf vs. Empire Company Limited | Maple Leaf vs. Premium Brands Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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