Correlation Between Canso Select and Richelieu Hardware

Can any of the company-specific risk be diversified away by investing in both Canso Select and Richelieu Hardware 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 Canso Select and Richelieu Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canso Select Opportunities and Richelieu Hardware, you can compare the effects of market volatilities on Canso Select and Richelieu Hardware 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 Canso Select with a short position of Richelieu Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canso Select and Richelieu Hardware.

Diversification Opportunities for Canso Select and Richelieu Hardware

-0.47

Correlation Coefficient

Canso Select  Richelieu Hardware

Very good diversification

The 3 months correlation between Canso and Richelieu is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Canso Select Opportunities and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware and Canso Select 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 Canso Select Opportunities are associated (or correlated) with Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Canso Select i.e., Canso Select and Richelieu Hardware go up and down completely randomly.

Pair Corralation between Canso Select and Richelieu Hardware

Assuming the 90 days trading horizon Canso Select Opportunities is expected to generate 1.28 times more return on investment than Richelieu Hardware. However, Canso Select is 1.28 times more volatile than Richelieu Hardware. It trades about 0.04 of its potential returns per unit of risk. Richelieu Hardware is currently generating about -0.13 per unit of risk. If you would invest  230.00  in Canso Select Opportunities on December 23, 2024 and sell it today you would earn a total of  10.00  from holding Canso Select Opportunities or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Canso Select Opportunities  vs.  Richelieu Hardware

Canso Select Opportu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Select Opportunities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Select is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Richelieu Hardware

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canso Select and Richelieu Hardware

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

The idea behind Canso Select Opportunities and Richelieu Hardware 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.