Correlation Between Colabor and Canadian Tire

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

By analyzing existing cross correlation between Colabor Group and Canadian Tire, you can compare the effects of market volatilities on Colabor and Canadian Tire 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 Colabor with a short position of Canadian Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colabor and Canadian Tire.

Diversification Opportunities for Colabor and Canadian Tire

0.24

Correlation Coefficient

Colabor  Canadian Tire

Modest diversification

The 3 months correlation between Colabor and Canadian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Colabor Group and Canadian Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Tire and Colabor 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 Colabor Group are associated (or correlated) with Canadian Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Tire has no effect on the direction of Colabor i.e., Colabor and Canadian Tire go up and down completely randomly.

Pair Corralation between Colabor and Canadian Tire

Assuming the 90 days trading horizon Colabor Group is expected to under-perform the Canadian Tire. In addition to that, Colabor is 1.93 times more volatile than Canadian Tire. It trades about -0.08 of its total potential returns per unit of risk. Canadian Tire is currently generating about 0.09 per unit of volatility. If you would invest  14,974  in Canadian Tire on October 7, 2024 and sell it today you would earn a total of  526.00  from holding Canadian Tire or generate 3.51% return on investment over 90 days.

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

Colabor Group  vs.  Canadian Tire

Colabor Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colabor Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canadian Tire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Tire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Tire is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Colabor and Canadian Tire

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

The idea behind Colabor Group and Canadian Tire 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.