Correlation Between Nutrien and Dollarama
Can any of the company-specific risk be diversified away by investing in both Nutrien and Dollarama 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 Nutrien and Dollarama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nutrien and Dollarama, you can compare the effects of market volatilities on Nutrien and Dollarama 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 Nutrien with a short position of Dollarama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nutrien and Dollarama.
Diversification Opportunities for Nutrien and Dollarama
Poor diversification
The 3 months correlation between Nutrien and Dollarama is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and Nutrien 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 Nutrien are associated (or correlated) with Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Nutrien i.e., Nutrien and Dollarama go up and down completely randomly.
Pair Corralation between Nutrien and Dollarama
Assuming the 90 days trading horizon Nutrien is expected to under-perform the Dollarama. In addition to that, Nutrien is 1.33 times more volatile than Dollarama. It trades about -0.02 of its total potential returns per unit of risk. Dollarama is currently generating about 0.06 per unit of volatility. If you would invest 14,332 in Dollarama on August 25, 2024 and sell it today you would earn a total of 219.00 from holding Dollarama or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nutrien vs. Dollarama
Performance |
| Timeline |
| Nutrien |
| Dollarama |
Nutrien and Dollarama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nutrien and Dollarama
The main advantage of trading using opposite Nutrien and Dollarama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nutrien position performs unexpectedly, Dollarama 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 Dollarama will offset losses from the drop in Dollarama's long position.| Nutrien vs. Arbor Metals Corp | Nutrien vs. Caribbean Utilities | Nutrien vs. Dream Industrial Real | Nutrien vs. Questor Technology |
| Dollarama vs. Canadian Tire | Dollarama vs. Loblaw Companies Limited | Dollarama vs. Metro Inc | Dollarama vs. Canadian National Railway |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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