Correlation Between Canadian TireLimited and Empire Company

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

By analyzing existing cross correlation between Canadian Tire and Empire Company Limited, you can compare the effects of market volatilities on Canadian TireLimited and Empire Company 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 Empire Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian TireLimited and Empire Company.

Diversification Opportunities for Canadian TireLimited and Empire Company

-0.26

Correlation Coefficient

Canadian TireLimited  Empire Company

Very good diversification

The 3 months correlation between Canadian and Empire is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Tire and Empire Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Limited 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 Empire Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Limited has no effect on the direction of Canadian TireLimited i.e., Canadian TireLimited and Empire Company go up and down completely randomly.

Pair Corralation between Canadian TireLimited and Empire Company

Assuming the 90 days trading horizon Canadian Tire is expected to under-perform the Empire Company. In addition to that, Canadian TireLimited is 1.59 times more volatile than Empire Company Limited. It trades about -0.06 of its total potential returns per unit of risk. Empire Company Limited is currently generating about 0.11 per unit of volatility. If you would invest  4,206  in Empire Company Limited on December 1, 2024 and sell it today you would earn a total of  297.00  from holding Empire Company Limited or generate 7.06% return on investment over 90 days.

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

Canadian Tire  vs.  Empire Company Limited

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.

Empire Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Empire Company may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canadian TireLimited and Empire Company

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

The idea behind Canadian Tire and Empire Company Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.