Correlation Between Canadian General and Terravest Capital

Can any of the company-specific risk be diversified away by investing in both Canadian General and Terravest Capital 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 Terravest Capital 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 Terravest Capital, you can compare the effects of market volatilities on Canadian General and Terravest Capital 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 Terravest Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian General and Terravest Capital.

Diversification Opportunities for Canadian General and Terravest Capital

-0.1

Correlation Coefficient

Canadian General  Terravest Capital

Good diversification

The 3 months correlation between Canadian and Terravest is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and Terravest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terravest Capital 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 Terravest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terravest Capital has no effect on the direction of Canadian General i.e., Canadian General and Terravest Capital go up and down completely randomly.

Pair Corralation between Canadian General and Terravest Capital

Assuming the 90 days trading horizon Canadian General Investments is expected to under-perform the Terravest Capital. But the stock apears to be less risky and, when comparing its historical volatility, Canadian General Investments is 2.64 times less risky than Terravest Capital. The stock trades about -0.12 of its potential returns per unit of risk. The Terravest Capital is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  11,939  in Terravest Capital on December 4, 2024 and sell it today you would lose (1,162) from holding Terravest Capital or give up 9.73% of portfolio value over 90 days.

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

Canadian General Investments  vs.  Terravest Capital

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 unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Terravest Capital

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Canadian General and Terravest Capital

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

The idea behind Canadian General Investments and Terravest Capital 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.