Correlation Between Dividend Select and Canadian Life

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

By analyzing existing cross correlation between Dividend Select 15 and Canadian Life Companies, you can compare the effects of market volatilities on Dividend Select and Canadian Life 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 Dividend Select with a short position of Canadian Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Select and Canadian Life.

Diversification Opportunities for Dividend Select and Canadian Life

0.94

Correlation Coefficient

Dividend Select  Canadian Life

Almost no diversification

The 3 months correlation between Dividend and Canadian is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Select 15 and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies and Dividend Select 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 Dividend Select 15 are associated (or correlated) with Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Dividend Select i.e., Dividend Select and Canadian Life go up and down completely randomly.

Pair Corralation between Dividend Select and Canadian Life

Assuming the 90 days horizon Dividend Select is expected to generate 3.8 times less return on investment than Canadian Life. But when comparing it to its historical volatility, Dividend Select 15 is 2.23 times less risky than Canadian Life. It trades about 0.18 of its potential returns per unit of risk. Canadian Life Companies is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  518.00  in Canadian Life Companies on September 4, 2024 and sell it today you would earn a total of  187.00  from holding Canadian Life Companies or generate 36.1% return on investment over 90 days.

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

Dividend Select 15  vs.  Canadian Life Companies

Dividend Select 15

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Select 15 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Canadian Life Companies

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Life Companies are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Canadian Life displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dividend Select and Canadian Life

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

The idea behind Dividend Select 15 and Canadian Life Companies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.