Correlation Between Richelieu Hardware and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Richelieu Hardware and Pembina Pipeline 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 Richelieu Hardware and Pembina Pipeline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Richelieu Hardware and Pembina Pipeline Corp, you can compare the effects of market volatilities on Richelieu Hardware and Pembina Pipeline 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 Richelieu Hardware with a short position of Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richelieu Hardware and Pembina Pipeline.
Diversification Opportunities for Richelieu Hardware and Pembina Pipeline
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Richelieu and Pembina is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Richelieu Hardware and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp and Richelieu Hardware 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 Richelieu Hardware are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Richelieu Hardware i.e., Richelieu Hardware and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Richelieu Hardware and Pembina Pipeline
Assuming the 90 days trading horizon Richelieu Hardware is expected to generate 3.5 times more return on investment than Pembina Pipeline. However, Richelieu Hardware is 3.5 times more volatile than Pembina Pipeline Corp. It trades about 0.29 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.37 per unit of risk. If you would invest 3,855 in Richelieu Hardware on October 23, 2024 and sell it today you would earn a total of 402.00 from holding Richelieu Hardware or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Richelieu Hardware vs. Pembina Pipeline Corp
Performance |
| Timeline |
| Richelieu Hardware |
| Pembina Pipeline Corp |
Richelieu Hardware and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Richelieu Hardware and Pembina Pipeline
The main advantage of trading using opposite Richelieu Hardware and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richelieu Hardware position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline's long position.| Richelieu Hardware vs. Stella Jones | Richelieu Hardware vs. Winpak | Richelieu Hardware vs. Stantec | Richelieu Hardware vs. Gildan Activewear |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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