Correlation Between Homerun Resources and Canadian Utilities

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

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

Diversification Opportunities for Homerun Resources and Canadian Utilities

0.52

Correlation Coefficient

Homerun Resources  Canadian Utilities

Very weak diversification

The 3 months correlation between Homerun and Canadian is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Homerun Resources and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and Homerun Resources 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 Homerun Resources are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Homerun Resources i.e., Homerun Resources and Canadian Utilities go up and down completely randomly.

Pair Corralation between Homerun Resources and Canadian Utilities

Assuming the 90 days horizon Homerun Resources is expected to generate 2.49 times less return on investment than Canadian Utilities. In addition to that, Homerun Resources is 6.13 times more volatile than Canadian Utilities Limited. It trades about 0.01 of its total potential returns per unit of risk. Canadian Utilities Limited is currently generating about 0.13 per unit of volatility. If you would invest  3,405  in Canadian Utilities Limited on December 21, 2024 and sell it today you would earn a total of  212.00  from holding Canadian Utilities Limited or generate 6.23% return on investment over 90 days.

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

Homerun Resources  vs.  Canadian Utilities Limited

Homerun Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Homerun Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Canadian Utilities

Risk-Adjusted Performance

OK

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

Pair Trading with Homerun Resources and Canadian Utilities

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

The idea behind Homerun Resources and Canadian Utilities 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.