Correlation Between Globex Mining and Maple Leaf

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

By analyzing existing cross correlation between Globex Mining Enterprises and Maple Leaf Foods, you can compare the effects of market volatilities on Globex Mining and Maple Leaf 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 Globex Mining with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globex Mining and Maple Leaf.

Diversification Opportunities for Globex Mining and Maple Leaf

-0.26

Correlation Coefficient

Globex Mining  Maple Leaf

Very good diversification

The 3 months correlation between Globex and Maple is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Globex Mining 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 Globex Mining Enterprises are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Globex Mining i.e., Globex Mining and Maple Leaf go up and down completely randomly.

Pair Corralation between Globex Mining and Maple Leaf

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 1.36 times more return on investment than Maple Leaf. However, Globex Mining is 1.36 times more volatile than Maple Leaf Foods. It trades about 0.04 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about -0.01 per unit of risk. If you would invest  84.00  in Globex Mining Enterprises on October 4, 2024 and sell it today you would earn a total of  36.00  from holding Globex Mining Enterprises or generate 42.86% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  Maple Leaf Foods

Globex Mining Enterprises

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Maple Leaf Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maple Leaf Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Globex Mining and Maple Leaf

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

The idea behind Globex Mining Enterprises and Maple Leaf Foods 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.