Correlation Between Western Investment and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Western Investment 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 Western Investment and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Investment and Maple Leaf Foods, you can compare the effects of market volatilities on Western Investment 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 Western Investment with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Investment and Maple Leaf.
Diversification Opportunities for Western Investment and Maple Leaf
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and Maple is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment 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 Western Investment 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 Western Investment 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 Western Investment i.e., Western Investment and Maple Leaf go up and down completely randomly.
Pair Corralation between Western Investment and Maple Leaf
Given the investment horizon of 90 days Western Investment is expected to generate 2.14 times more return on investment than Maple Leaf. However, Western Investment is 2.14 times more volatile than Maple Leaf Foods. It trades about 0.03 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.01 per unit of risk. If you would invest 36.00 in Western Investment on September 2, 2024 and sell it today you would earn a total of 11.00 from holding Western Investment or generate 30.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Investment vs. Maple Leaf Foods
Performance |
| Timeline |
| Western Investment |
| Maple Leaf Foods |
Western Investment and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Investment and Maple Leaf
The main advantage of trading using opposite Western Investment and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Investment 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.| Western Investment vs. NovaGold Resources | Western Investment vs. HPQ Silicon Resources | Western Investment vs. Eastwood Bio Medical Canada | Western Investment vs. Diamond Fields Resources |
| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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