Correlation Between PHN Canadian and CI Gold

Can any of the company-specific risk be diversified away by investing in both PHN Canadian and CI Gold 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 PHN Canadian and CI Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PHN Canadian Equity and CI Gold Bullion, you can compare the effects of market volatilities on PHN Canadian and CI Gold 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 PHN Canadian with a short position of CI Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Canadian and CI Gold.

Diversification Opportunities for PHN Canadian and CI Gold

0.38

Correlation Coefficient

PHN Canadian  CI Gold

Weak diversification

The 3 months correlation between PHN and VALT-B is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PHN Canadian Equity and CI Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Gold Bullion and PHN Canadian 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 PHN Canadian Equity are associated (or correlated) with CI Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Gold Bullion has no effect on the direction of PHN Canadian i.e., PHN Canadian and CI Gold go up and down completely randomly.

Pair Corralation between PHN Canadian and CI Gold

Assuming the 90 days trading horizon PHN Canadian is expected to generate 2.8 times less return on investment than CI Gold. But when comparing it to its historical volatility, PHN Canadian Equity is 1.56 times less risky than CI Gold. It trades about 0.06 of its potential returns per unit of risk. CI Gold Bullion is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,535  in CI Gold Bullion on September 28, 2024 and sell it today you would earn a total of  203.00  from holding CI Gold Bullion or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PHN Canadian Equity  vs.  CI Gold Bullion

PHN Canadian Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Canadian Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, PHN Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CI Gold Bullion

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Gold Bullion are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong essential indicators, CI Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PHN Canadian and CI Gold

The main advantage of trading using opposite PHN Canadian and CI Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHN Canadian position performs unexpectedly, CI Gold 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 CI Gold will offset losses from the drop in CI Gold's long position.

The idea behind PHN Canadian Equity and CI Gold Bullion pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.