Correlation Between CCL Industries and North West
Can any of the company-specific risk be diversified away by investing in both CCL Industries and North West 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 CCL Industries and North West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CCL Industries and North West, you can compare the effects of market volatilities on CCL Industries and North West 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 CCL Industries with a short position of North West. Check out your portfolio center. Please also check ongoing floating volatility patterns of CCL Industries and North West.
Diversification Opportunities for CCL Industries and North West
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CCL and North is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and North West in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North West and CCL Industries 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 CCL Industries are associated (or correlated) with North West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North West has no effect on the direction of CCL Industries i.e., CCL Industries and North West go up and down completely randomly.
Pair Corralation between CCL Industries and North West
Assuming the 90 days trading horizon CCL Industries is expected to under-perform the North West. But the stock apears to be less risky and, when comparing its historical volatility, CCL Industries is 1.05 times less risky than North West. The stock trades about -0.01 of its potential returns per unit of risk. The North West is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,031 in North West on September 6, 2024 and sell it today you would earn a total of 249.00 from holding North West or generate 4.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
CCL Industries vs. North West
Performance |
Timeline |
CCL Industries |
North West |
CCL Industries and North West Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CCL Industries and North West
The main advantage of trading using opposite CCL Industries and North West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CCL Industries position performs unexpectedly, North West 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 North West will offset losses from the drop in North West's long position.CCL Industries vs. Stella Jones | CCL Industries vs. Gildan Activewear | CCL Industries vs. Toromont Industries | CCL Industries vs. Waste Connections |
North West vs. Empire Company Limited | North West vs. Transcontinental | North West vs. Premium Brands Holdings | North West vs. Exchange Income |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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