Correlation Between S A P and Empire Company
Can any of the company-specific risk be diversified away by investing in both S A P and Empire Company 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 Empire Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saputo Inc and Empire Company Limited, you can compare the effects of market volatilities on S A P and Empire Company 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 Empire Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Empire Company.
Diversification Opportunities for S A P and Empire Company
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SAP and Empire is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Empire Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Limited 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 Empire Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Limited has no effect on the direction of S A P i.e., S A P and Empire Company go up and down completely randomly.
Pair Corralation between S A P and Empire Company
Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the Empire Company. But the stock apears to be less risky and, when comparing its historical volatility, Saputo Inc is 1.05 times less risky than Empire Company. The stock trades about -0.26 of its potential returns per unit of risk. The Empire Company Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,055 in Empire Company Limited on October 22, 2024 and sell it today you would earn a total of 185.00 from holding Empire Company Limited or generate 4.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Saputo Inc vs. Empire Company Limited
Performance |
| Timeline |
| Saputo Inc |
| Empire Limited |
S A P and Empire Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Empire Company
The main advantage of trading using opposite S A P and Empire Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Empire Company 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 Empire Company will offset losses from the drop in Empire Company'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 |
| Empire Company vs. Metro Inc | Empire Company vs. George Weston Limited | Empire Company vs. Saputo Inc | Empire Company vs. Loblaw Companies Limited |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |