Correlation Between Data Communications and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Data Communications and Maple Leaf 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 Data Communications and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Data Communications Management and Maple Leaf Foods, you can compare the effects of market volatilities on Data Communications and Maple Leaf 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 Data Communications with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Communications and Maple Leaf.
Diversification Opportunities for Data Communications and Maple Leaf
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Data and Maple is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Data Communications 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 Data Communications Management are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Data Communications i.e., Data Communications and Maple Leaf go up and down completely randomly.
Pair Corralation between Data Communications and Maple Leaf
Assuming the 90 days trading horizon Data Communications Management is expected to under-perform the Maple Leaf. In addition to that, Data Communications is 2.84 times more volatile than Maple Leaf Foods. It trades about -0.1 of its total potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.05 per unit of volatility. If you would invest 2,168 in Maple Leaf Foods on September 12, 2024 and sell it today you would earn a total of 92.00 from holding Maple Leaf Foods or generate 4.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Data Communications Management vs. Maple Leaf Foods
Performance |
Timeline |
Data Communications |
Maple Leaf Foods |
Data Communications and Maple Leaf Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Data Communications and Maple Leaf
The main advantage of trading using opposite Data Communications and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Communications position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.Data Communications vs. Current Water Technologies | Data Communications vs. Plurilock Security | Data Communications vs. PowerBand Solutions | Data Communications vs. iShares Canadian HYBrid |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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