Correlation Between Canadian TireLimited and Alimentation Couchen

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

By analyzing existing cross correlation between Canadian Tire and Alimentation Couchen Tard, you can compare the effects of market volatilities on Canadian TireLimited and Alimentation Couchen 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 TireLimited with a short position of Alimentation Couchen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian TireLimited and Alimentation Couchen.

Diversification Opportunities for Canadian TireLimited and Alimentation Couchen

0.2

Correlation Coefficient

Canadian TireLimited  Alimentation Couchen

Modest diversification

The 3 months correlation between Canadian and Alimentation is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Tire and Alimentation Couchen Tard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimentation Couchen Tard and Canadian TireLimited 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 Tire are associated (or correlated) with Alimentation Couchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimentation Couchen Tard has no effect on the direction of Canadian TireLimited i.e., Canadian TireLimited and Alimentation Couchen go up and down completely randomly.

Pair Corralation between Canadian TireLimited and Alimentation Couchen

Assuming the 90 days trading horizon Canadian Tire is expected to under-perform the Alimentation Couchen. In addition to that, Canadian TireLimited is 2.02 times more volatile than Alimentation Couchen Tard. It trades about -0.28 of its total potential returns per unit of risk. Alimentation Couchen Tard is currently generating about -0.3 per unit of volatility. If you would invest  7,742  in Alimentation Couchen Tard on December 1, 2024 and sell it today you would lose (549.00) from holding Alimentation Couchen Tard or give up 7.09% of portfolio value over 90 days.

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

Canadian Tire  vs.  Alimentation Couchen Tard

Canadian TireLimited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Tire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Alimentation Couchen Tard

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alimentation Couchen Tard 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 fundamental 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 Canadian TireLimited and Alimentation Couchen

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

The idea behind Canadian Tire and Alimentation Couchen Tard 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.