Correlation Between Big Rock and Canoe EIT

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

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

Diversification Opportunities for Big Rock and Canoe EIT

-0.32

Correlation Coefficient

Big Rock  Canoe EIT

Very good diversification

The 3 months correlation between Big and Canoe is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Big Rock Brewery and Canoe EIT Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoe EIT Income and Big Rock 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 Big Rock Brewery are associated (or correlated) with Canoe EIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoe EIT Income has no effect on the direction of Big Rock i.e., Big Rock and Canoe EIT go up and down completely randomly.

Pair Corralation between Big Rock and Canoe EIT

Assuming the 90 days horizon Big Rock Brewery is expected to generate 5.8 times more return on investment than Canoe EIT. However, Big Rock is 5.8 times more volatile than Canoe EIT Income. It trades about 0.05 of its potential returns per unit of risk. Canoe EIT Income is currently generating about 0.13 per unit of risk. If you would invest  110.00  in Big Rock Brewery on October 7, 2024 and sell it today you would earn a total of  5.00  from holding Big Rock Brewery or generate 4.55% return on investment over 90 days.

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

Big Rock Brewery  vs.  Canoe EIT Income

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Big Rock is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Canoe EIT Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Canoe EIT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Big Rock and Canoe EIT

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

The idea behind Big Rock Brewery and Canoe EIT Income 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.