Correlation Between Canadian Utilities and Chatham Rock
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Chatham Rock 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 Utilities and Chatham Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Ltd and Chatham Rock Phosphate, you can compare the effects of market volatilities on Canadian Utilities and Chatham Rock 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 Utilities with a short position of Chatham Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Chatham Rock.
Diversification Opportunities for Canadian Utilities and Chatham Rock
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Canadian and Chatham is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Ltd and Chatham Rock Phosphate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Rock Phosphate and Canadian Utilities 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 Utilities Ltd are associated (or correlated) with Chatham Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Rock Phosphate has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Chatham Rock go up and down completely randomly.
Pair Corralation between Canadian Utilities and Chatham Rock
Assuming the 90 days trading horizon Canadian Utilities is expected to generate 7.58 times less return on investment than Chatham Rock. But when comparing it to its historical volatility, Canadian Utilities Ltd is 15.62 times less risky than Chatham Rock. It trades about 0.08 of its potential returns per unit of risk. Chatham Rock Phosphate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9.00 in Chatham Rock Phosphate on September 26, 2024 and sell it today you would lose (1.00) from holding Chatham Rock Phosphate or give up 11.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Canadian Utilities Ltd vs. Chatham Rock Phosphate
Performance |
Timeline |
Canadian Utilities |
Chatham Rock Phosphate |
Canadian Utilities and Chatham Rock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Canadian Utilities and Chatham Rock
The main advantage of trading using opposite Canadian Utilities and Chatham Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Chatham Rock 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 Chatham Rock will offset losses from the drop in Chatham Rock's long position.Canadian Utilities vs. Chatham Rock Phosphate | Canadian Utilities vs. Elixxer | Canadian Utilities vs. Cielo Waste Solutions | Canadian Utilities vs. Blockmate Ventures |
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Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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