Correlation Between Canoe EIT and SolGold PLC

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

Diversification Opportunities for Canoe EIT and SolGold PLC

-0.9

Correlation Coefficient

Canoe EIT  SolGold PLC

Pay attention - limited upside

The 3 months correlation between Canoe and SolGold is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Canoe EIT Income and SolGold PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolGold PLC 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 SolGold PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolGold PLC has no effect on the direction of Canoe EIT i.e., Canoe EIT and SolGold PLC go up and down completely randomly.

Pair Corralation between Canoe EIT and SolGold PLC

Assuming the 90 days trading horizon Canoe EIT Income is expected to generate 0.14 times more return on investment than SolGold PLC. However, Canoe EIT Income is 7.3 times less risky than SolGold PLC. It trades about -0.23 of its potential returns per unit of risk. SolGold PLC is currently generating about -0.2 per unit of risk. If you would invest  1,542  in Canoe EIT Income on September 23, 2024 and sell it today you would lose (35.00) from holding Canoe EIT Income or give up 2.27% of portfolio value over 90 days.

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

Canoe EIT Income  vs.  SolGold PLC

Canoe EIT Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canoe EIT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SolGold PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolGold PLC 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 SolGold PLC

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

The idea behind Canoe EIT Income and SolGold PLC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.