Correlation Between High Liner and Canlan Ice

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

By analyzing existing cross correlation between High Liner Foods and Canlan Ice Sports, you can compare the effects of market volatilities on High Liner and Canlan Ice 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 High Liner with a short position of Canlan Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Liner and Canlan Ice.

Diversification Opportunities for High Liner and Canlan Ice

0.57

Correlation Coefficient

High Liner  Canlan Ice

Very weak diversification

The 3 months correlation between High and Canlan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding High Liner Foods and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and High Liner 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 High Liner Foods are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of High Liner i.e., High Liner and Canlan Ice go up and down completely randomly.

Pair Corralation between High Liner and Canlan Ice

Assuming the 90 days trading horizon High Liner Foods is expected to generate 1.01 times more return on investment than Canlan Ice. However, High Liner is 1.01 times more volatile than Canlan Ice Sports. It trades about 0.2 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.08 per unit of risk. If you would invest  1,294  in High Liner Foods on September 16, 2024 and sell it today you would earn a total of  278.00  from holding High Liner Foods or generate 21.48% return on investment over 90 days.

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

High Liner Foods  vs.  Canlan Ice Sports

High Liner Foods

Risk-Adjusted Performance

15 of 100

Good

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

Canlan Ice Sports

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Canlan Ice may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with High Liner and Canlan Ice

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

The idea behind High Liner Foods and Canlan Ice Sports 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.