Correlation Between Tangerine Equity and CDSPI Canadian

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

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

Diversification Opportunities for Tangerine Equity and CDSPI Canadian

0.9

Correlation Coefficient

Tangerine Equity  CDSPI Canadian

Almost no diversification

The 3 months correlation between Tangerine and CDSPI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Tangerine Equity Growth and CDSPI Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDSPI Canadian Equity and Tangerine Equity 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 Tangerine Equity Growth are associated (or correlated) with CDSPI Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDSPI Canadian Equity has no effect on the direction of Tangerine Equity i.e., Tangerine Equity and CDSPI Canadian go up and down completely randomly.

Pair Corralation between Tangerine Equity and CDSPI Canadian

Assuming the 90 days trading horizon Tangerine Equity Growth is expected to generate 0.9 times more return on investment than CDSPI Canadian. However, Tangerine Equity Growth is 1.11 times less risky than CDSPI Canadian. It trades about -0.01 of its potential returns per unit of risk. CDSPI Canadian Equity is currently generating about -0.03 per unit of risk. If you would invest  1,468  in Tangerine Equity Growth on December 27, 2024 and sell it today you would lose (11.00) from holding Tangerine Equity Growth or give up 0.75% of portfolio value over 90 days.

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

Tangerine Equity Growth  vs.  CDSPI Canadian Equity

Tangerine Equity Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tangerine Equity Growth has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent forward-looking signals, Tangerine Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

CDSPI Canadian Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDSPI Canadian Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, CDSPI Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tangerine Equity and CDSPI Canadian

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

The idea behind Tangerine Equity Growth and CDSPI Canadian Equity 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.