Correlation Between Canadian General and Sage Group

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

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

Diversification Opportunities for Canadian General and Sage Group

0.78

Correlation Coefficient

Canadian General  Sage Group

Poor diversification

The 3 months correlation between Canadian and Sage is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC and Canadian General 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 Canadian General Investments are associated (or correlated) with Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Canadian General i.e., Canadian General and Sage Group go up and down completely randomly.

Pair Corralation between Canadian General and Sage Group

Assuming the 90 days trading horizon Canadian General Investments is expected to under-perform the Sage Group. In addition to that, Canadian General is 2.05 times more volatile than Sage Group PLC. It trades about -0.1 of its total potential returns per unit of risk. Sage Group PLC is currently generating about -0.12 per unit of volatility. If you would invest  127,569  in Sage Group PLC on December 23, 2024 and sell it today you would lose (8,669) from holding Sage Group PLC or give up 6.8% of portfolio value over 90 days.

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

Canadian General Investments  vs.  Sage Group PLC

Canadian General Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian General Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sage Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sage Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Canadian General and Sage Group

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

The idea behind Canadian General Investments and Sage Group PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.