Correlation Between Canoe EIT and Stella Jones

Can any of the company-specific risk be diversified away by investing in both Canoe EIT and Stella Jones 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 Canoe EIT and Stella Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canoe EIT Income and Stella Jones, you can compare the effects of market volatilities on Canoe EIT and Stella Jones 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 Canoe EIT with a short position of Stella Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canoe EIT and Stella Jones.

Diversification Opportunities for Canoe EIT and Stella Jones

-0.83

Correlation Coefficient

Canoe EIT  Stella Jones

Pay attention - limited upside

The 3 months correlation between Canoe and Stella is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Canoe EIT Income and Stella Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stella Jones and Canoe EIT 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 Canoe EIT Income are associated (or correlated) with Stella Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stella Jones has no effect on the direction of Canoe EIT i.e., Canoe EIT and Stella Jones go up and down completely randomly.

Pair Corralation between Canoe EIT and Stella Jones

Assuming the 90 days trading horizon Canoe EIT Income is expected to generate 0.25 times more return on investment than Stella Jones. However, Canoe EIT Income is 3.93 times less risky than Stella Jones. It trades about 0.11 of its potential returns per unit of risk. Stella Jones is currently generating about -0.15 per unit of risk. If you would invest  1,477  in Canoe EIT Income on October 1, 2024 and sell it today you would earn a total of  44.00  from holding Canoe EIT Income or generate 2.98% return on investment over 90 days.

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

Canoe EIT Income  vs.  Stella Jones

Canoe EIT Income

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Canoe EIT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canoe EIT and Stella Jones

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

The idea behind Canoe EIT Income and Stella Jones 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.