Correlation Between Canadian Utilities and A W

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

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

Diversification Opportunities for Canadian Utilities and A W

0.27

Correlation Coefficient

Canadian Utilities  A W

Modest diversification

The 3 months correlation between Canadian and A W is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and A W FOOD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A W FOOD 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 Limited are associated (or correlated) with A W. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A W FOOD has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and A W go up and down completely randomly.

Pair Corralation between Canadian Utilities and A W

Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.42 times more return on investment than A W. However, Canadian Utilities Limited is 2.39 times less risky than A W. It trades about -0.04 of its potential returns per unit of risk. A W FOOD is currently generating about -0.36 per unit of risk. If you would invest  3,451  in Canadian Utilities Limited on October 23, 2024 and sell it today you would lose (18.00) from holding Canadian Utilities Limited or give up 0.52% 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 Limited  vs.  A W FOOD

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Canadian Utilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

A W FOOD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A W FOOD 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canadian Utilities and A W

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

The idea behind Canadian Utilities Limited and A W FOOD 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 Transaction History module to view history of all your transactions and understand their impact on performance.