Correlation Between Winpak and ATCO
Can any of the company-specific risk be diversified away by investing in both Winpak and ATCO 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 Winpak and ATCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Winpak and ATCO, you can compare the effects of market volatilities on Winpak and ATCO 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 Winpak with a short position of ATCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Winpak and ATCO.
Diversification Opportunities for Winpak and ATCO
Poor diversification
The 3 months correlation between Winpak and ATCO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Winpak and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Winpak 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 Winpak are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Winpak i.e., Winpak and ATCO go up and down completely randomly.
Pair Corralation between Winpak and ATCO
Assuming the 90 days trading horizon Winpak is expected to generate 1.5 times less return on investment than ATCO. But when comparing it to its historical volatility, Winpak is 1.27 times less risky than ATCO. It trades about 0.04 of its potential returns per unit of risk. ATCO is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,924 in ATCO on September 1, 2024 and sell it today you would earn a total of 1,305 from holding ATCO or generate 33.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Winpak vs. ATCO
Performance |
| Timeline |
| Winpak |
| ATCO |
Winpak and ATCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Winpak and ATCO
The main advantage of trading using opposite Winpak and ATCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winpak position performs unexpectedly, ATCO 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 ATCO will offset losses from the drop in ATCO's long position.| Winpak vs. Air Canada | Winpak vs. Wilmington Capital Management | Winpak vs. Altair Resources | Winpak vs. Dream Office Real |
| ATCO vs. Computer Modelling Group | ATCO vs. Richelieu Hardware | ATCO vs. Economic Investment Trust | ATCO vs. Highwood Asset Management |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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