Correlation Between ECN Capital and Postmedia Network

Can any of the company-specific risk be diversified away by investing in both ECN Capital and Postmedia Network 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 ECN Capital and Postmedia Network into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECN Capital Corp and Postmedia Network Canada, you can compare the effects of market volatilities on ECN Capital and Postmedia Network 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 ECN Capital with a short position of Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and Postmedia Network.

Diversification Opportunities for ECN Capital and Postmedia Network

0.5

Correlation Coefficient

ECN Capital  Postmedia Network

Very weak diversification

The 3 months correlation between ECN and Postmedia is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada and ECN Capital 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 ECN Capital Corp are associated (or correlated) with Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of ECN Capital i.e., ECN Capital and Postmedia Network go up and down completely randomly.

Pair Corralation between ECN Capital and Postmedia Network

Assuming the 90 days trading horizon ECN Capital Corp is expected to generate 0.78 times more return on investment than Postmedia Network. However, ECN Capital Corp is 1.29 times less risky than Postmedia Network. It trades about -0.1 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.09 per unit of risk. If you would invest  317.00  in ECN Capital Corp on December 30, 2024 and sell it today you would lose (55.00) from holding ECN Capital Corp or give up 17.35% of portfolio value over 90 days.

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

ECN Capital Corp  vs.  Postmedia Network Canada

ECN Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECN Capital Corp 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Postmedia Network Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ECN Capital and Postmedia Network

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

The idea behind ECN Capital Corp and Postmedia Network Canada 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.