Correlation Between George Weston and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both George Weston and Loblaw Companies 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 George Weston and Loblaw Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between George Weston Limited and Loblaw Companies Limited, you can compare the effects of market volatilities on George Weston and Loblaw Companies 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 George Weston with a short position of Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of George Weston and Loblaw Companies.
Diversification Opportunities for George Weston and Loblaw Companies
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between George and Loblaw is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding George Weston Limited and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies and George Weston 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 George Weston Limited are associated (or correlated) with Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of George Weston i.e., George Weston and Loblaw Companies go up and down completely randomly.
Pair Corralation between George Weston and Loblaw Companies
Assuming the 90 days horizon George Weston is expected to generate 1.43 times less return on investment than Loblaw Companies. In addition to that, George Weston is 1.07 times more volatile than Loblaw Companies Limited. It trades about 0.06 of its total potential returns per unit of risk. Loblaw Companies Limited is currently generating about 0.08 per unit of volatility. If you would invest 11,891 in Loblaw Companies Limited on August 28, 2024 and sell it today you would earn a total of 5,977 from holding Loblaw Companies Limited or generate 50.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
George Weston Limited vs. Loblaw Companies Limited
Performance |
| Timeline |
| George Weston Limited |
| Loblaw Companies |
George Weston and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with George Weston and Loblaw Companies
The main advantage of trading using opposite George Weston and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if George Weston position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| George Weston vs. Loblaw Companies Limited | George Weston vs. Saputo Inc | George Weston vs. Thomson Reuters Corp | George Weston vs. Metro Inc |
| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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