Correlation Between S A P and Dollarama
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and Dollarama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saputo Inc and Dollarama, you can compare the effects of market volatilities on S A P 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 S A P with a short position of Dollarama. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Dollarama.
Diversification Opportunities for S A P and Dollarama
Poor diversification
The 3 months correlation between SAP and Dollarama is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and S A P 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 Saputo Inc 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 S A P i.e., S A P and Dollarama go up and down completely randomly.
Pair Corralation between S A P and Dollarama
Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the Dollarama. In addition to that, S A P is 1.13 times more volatile than Dollarama. It trades about -0.12 of its total potential returns per unit of risk. Dollarama is currently generating about -0.07 per unit of volatility. If you would invest 14,011 in Dollarama on November 3, 2024 and sell it today you would lose (258.00) from holding Dollarama or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Saputo Inc vs. Dollarama
Performance |
| Timeline |
| Saputo Inc |
| Dollarama |
S A P and Dollarama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Dollarama
The main advantage of trading using opposite S A P and Dollarama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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.| S A P vs. Metro Inc | S A P vs. George Weston Limited | S A P vs. Gildan Activewear | S A P vs. Loblaw Companies Limited |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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