Correlation Between Canlan Ice and Borealis Foods

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

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

Diversification Opportunities for Canlan Ice and Borealis Foods

0.77

Correlation Coefficient

Canlan Ice  Borealis Foods

Poor diversification

The 3 months correlation between Canlan and Borealis is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods and Canlan Ice 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 Canlan Ice Sports are associated (or correlated) with Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of Canlan Ice i.e., Canlan Ice and Borealis Foods go up and down completely randomly.

Pair Corralation between Canlan Ice and Borealis Foods

Assuming the 90 days horizon Canlan Ice is expected to generate 26.47 times less return on investment than Borealis Foods. But when comparing it to its historical volatility, Canlan Ice Sports is 35.24 times less risky than Borealis Foods. It trades about 0.19 of its potential returns per unit of risk. Borealis Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6.46  in Borealis Foods on October 24, 2024 and sell it today you would earn a total of  4.54  from holding Borealis Foods or generate 70.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.68%
Values	Daily Returns

Canlan Ice Sports  vs.  Borealis Foods

Canlan Ice Sports

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Borealis Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Borealis Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Borealis Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canlan Ice and Borealis Foods

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

The idea behind Canlan Ice Sports and Borealis Foods 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.