Correlation Between Boralex and Cascades

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

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

Diversification Opportunities for Boralex and Cascades

-0.72

Correlation Coefficient

Boralex  Cascades

Pay attention - limited upside

The 3 months correlation between Boralex and Cascades is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Boralex and Cascades in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascades and Boralex 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 Boralex are associated (or correlated) with Cascades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascades has no effect on the direction of Boralex i.e., Boralex and Cascades go up and down completely randomly.

Pair Corralation between Boralex and Cascades

Assuming the 90 days trading horizon Boralex is expected to under-perform the Cascades. In addition to that, Boralex is 1.05 times more volatile than Cascades. It trades about -0.13 of its total potential returns per unit of risk. Cascades is currently generating about 0.33 per unit of volatility. If you would invest  942.00  in Cascades on September 13, 2024 and sell it today you would earn a total of  309.00  from holding Cascades or generate 32.8% return on investment over 90 days.

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

Boralex  vs.  Cascades

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cascades

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cascades are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cascades displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boralex and Cascades

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

The idea behind Boralex and Cascades 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 Anywhere module to track or share privately all of your investments from the convenience of any device.