Correlation Between FirstService Corp and Canoe EIT

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

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

Diversification Opportunities for FirstService Corp and Canoe EIT

0.88

Correlation Coefficient

FirstService Corp  Canoe EIT

Very poor diversification

The 3 months correlation between FirstService and Canoe is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Canoe EIT Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoe EIT Income and FirstService Corp 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 FirstService Corp are associated (or correlated) with Canoe EIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoe EIT Income has no effect on the direction of FirstService Corp i.e., FirstService Corp and Canoe EIT go up and down completely randomly.

Pair Corralation between FirstService Corp and Canoe EIT

Assuming the 90 days trading horizon FirstService Corp is expected to generate 2.09 times more return on investment than Canoe EIT. However, FirstService Corp is 2.09 times more volatile than Canoe EIT Income. It trades about 0.06 of its potential returns per unit of risk. Canoe EIT Income is currently generating about 0.1 per unit of risk. If you would invest  18,480  in FirstService Corp on October 4, 2024 and sell it today you would earn a total of  7,294  from holding FirstService Corp or generate 39.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

FirstService Corp  vs.  Canoe EIT Income

FirstService Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Canoe EIT Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 10 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FirstService Corp and Canoe EIT

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

The idea behind FirstService Corp and Canoe EIT Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.