Correlation Between Empire Company and George Weston

Can any of the company-specific risk be diversified away by investing in both Empire Company and George Weston 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 Empire Company and George Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire Company Limited and George Weston Limited, you can compare the effects of market volatilities on Empire Company and George Weston 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 Empire Company with a short position of George Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Company and George Weston.

Diversification Opportunities for Empire Company and George Weston

0.86

Correlation Coefficient

Empire Company  George Weston

Very poor diversification

The 3 months correlation between Empire and George is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Empire Company Limited and George Weston Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Weston Limited and Empire Company 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 Empire Company Limited are associated (or correlated) with George Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Weston Limited has no effect on the direction of Empire Company i.e., Empire Company and George Weston go up and down completely randomly.

Pair Corralation between Empire Company and George Weston

Assuming the 90 days trading horizon Empire Company is expected to generate 1.06 times less return on investment than George Weston. But when comparing it to its historical volatility, Empire Company Limited is 1.04 times less risky than George Weston. It trades about 0.1 of its potential returns per unit of risk. George Weston Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  22,288  in George Weston Limited on December 30, 2024 and sell it today you would earn a total of  1,710  from holding George Weston Limited or generate 7.67% return on investment over 90 days.

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

Empire Company Limited  vs.  George Weston Limited

Empire Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Empire Company may actually be approaching a critical reversion point that can send shares even higher in April 2025.

George Weston Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, George Weston may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Empire Company and George Weston

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

The idea behind Empire Company Limited and George Weston Limited 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.