Correlation Between ATCO and Canlan Ice

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

By analyzing existing cross correlation between ATCO and Canlan Ice Sports, you can compare the effects of market volatilities on ATCO and Canlan Ice 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 ATCO with a short position of Canlan Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATCO and Canlan Ice.

Diversification Opportunities for ATCO and Canlan Ice

0.23

Correlation Coefficient

ATCO  Canlan Ice

Modest diversification

The 3 months correlation between ATCO and Canlan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ATCO and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and ATCO 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 ATCO are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of ATCO i.e., ATCO and Canlan Ice go up and down completely randomly.

Pair Corralation between ATCO and Canlan Ice

Assuming the 90 days trading horizon ATCO is expected to generate 0.77 times more return on investment than Canlan Ice. However, ATCO is 1.3 times less risky than Canlan Ice. It trades about 0.04 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about -0.04 per unit of risk. If you would invest  4,890  in ATCO on December 27, 2024 and sell it today you would earn a total of  110.00  from holding ATCO or generate 2.25% return on investment over 90 days.

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

ATCO  vs.  Canlan Ice Sports

ATCO

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ATCO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATCO is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Canlan Ice Sports

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canlan Ice Sports has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ATCO and Canlan Ice

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

The idea behind ATCO and Canlan Ice Sports 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.