Correlation Between XLMedia PLC and Canadian Utilities

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

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

Diversification Opportunities for XLMedia PLC and Canadian Utilities

0.61

Correlation Coefficient

XLMedia PLC  Canadian Utilities

Poor diversification

The 3 months correlation between XLMedia and Canadian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia PLC and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and XLMedia PLC 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 XLMedia PLC are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of XLMedia PLC i.e., XLMedia PLC and Canadian Utilities go up and down completely randomly.

Pair Corralation between XLMedia PLC and Canadian Utilities

Assuming the 90 days horizon XLMedia PLC is expected to generate 7.57 times more return on investment than Canadian Utilities. However, XLMedia PLC is 7.57 times more volatile than Canadian Utilities Limited. It trades about 0.0 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.03 per unit of risk. If you would invest  14.00  in XLMedia PLC on November 29, 2024 and sell it today you would lose (2.00) from holding XLMedia PLC or give up 14.29% of portfolio value over 90 days.

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

XLMedia PLC  vs.  Canadian Utilities Limited

XLMedia PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days XLMedia PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, XLMedia PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Canadian Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XLMedia PLC and Canadian Utilities

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

The idea behind XLMedia PLC and Canadian Utilities Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.