Correlation Between Canadian Utilities and Pan American

Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Pan American 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 Pan American 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 Pan American Silver, you can compare the effects of market volatilities on Canadian Utilities and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Pan American.

Diversification Opportunities for Canadian Utilities and Pan American

0.49

Correlation Coefficient

Canadian Utilities  Pan American

Very weak diversification

The 3 months correlation between Canadian and Pan is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Pan American go up and down completely randomly.

Pair Corralation between Canadian Utilities and Pan American

Assuming the 90 days horizon Canadian Utilities is expected to generate 9.63 times less return on investment than Pan American. But when comparing it to its historical volatility, Canadian Utilities Limited is 2.7 times less risky than Pan American. It trades about 0.01 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,219  in Pan American Silver on October 25, 2024 and sell it today you would earn a total of  924.00  from holding Pan American Silver or generate 41.64% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  Pan American Silver

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.

Pan American Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan American Silver 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Canadian Utilities and Pan American

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

The idea behind Canadian Utilities Limited and Pan American Silver 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.