Correlation Between Canadian Tire and SBM OFFSHORE
Can any of the company-specific risk be diversified away by investing in both Canadian Tire and SBM OFFSHORE 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 Canadian Tire and SBM OFFSHORE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Tire Corp and SBM OFFSHORE, you can compare the effects of market volatilities on Canadian Tire and SBM OFFSHORE 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 Canadian Tire with a short position of SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Tire and SBM OFFSHORE.
Diversification Opportunities for Canadian Tire and SBM OFFSHORE
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Canadian and SBM is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Tire Corp and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and Canadian Tire 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 Canadian Tire Corp are associated (or correlated) with SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Canadian Tire i.e., Canadian Tire and SBM OFFSHORE go up and down completely randomly.
Pair Corralation between Canadian Tire and SBM OFFSHORE
Assuming the 90 days trading horizon Canadian Tire is expected to generate 1.74 times less return on investment than SBM OFFSHORE. But when comparing it to its historical volatility, Canadian Tire Corp is 1.14 times less risky than SBM OFFSHORE. It trades about 0.03 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,325 in SBM OFFSHORE on September 2, 2024 and sell it today you would earn a total of 375.00 from holding SBM OFFSHORE or generate 28.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Tire Corp vs. SBM OFFSHORE
Performance |
| Timeline |
| Canadian Tire Corp |
| SBM OFFSHORE |
Canadian Tire and SBM OFFSHORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Tire and SBM OFFSHORE
The main advantage of trading using opposite Canadian Tire and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Tire position performs unexpectedly, SBM OFFSHORE 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 SBM OFFSHORE will offset losses from the drop in SBM OFFSHORE's long position.| Canadian Tire vs. SBM OFFSHORE | Canadian Tire vs. PT Indofood Sukses | Canadian Tire vs. CN MODERN DAIRY | Canadian Tire vs. SENECA FOODS A |
| SBM OFFSHORE vs. Federal Agricultural Mortgage | SBM OFFSHORE vs. Corporate Office Properties | SBM OFFSHORE vs. Infrastrutture Wireless Italiane | SBM OFFSHORE vs. AUST AGRICULTURAL |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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