Correlation Between Loblaw Companies and Quebecor

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

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

Diversification Opportunities for Loblaw Companies and Quebecor

0.32

Correlation Coefficient

Loblaw Companies  Quebecor

Weak diversification

The 3 months correlation between Loblaw and Quebecor is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies and Quebecor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quebecor and Loblaw Companies 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 Loblaw Companies are associated (or correlated) with Quebecor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quebecor has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Quebecor go up and down completely randomly.

Pair Corralation between Loblaw Companies and Quebecor

Assuming the 90 days trading horizon Loblaw Companies is expected to generate 0.32 times more return on investment than Quebecor. However, Loblaw Companies is 3.12 times less risky than Quebecor. It trades about -0.1 of its potential returns per unit of risk. Quebecor is currently generating about -0.03 per unit of risk. If you would invest  2,353  in Loblaw Companies on August 31, 2024 and sell it today you would lose (73.00) from holding Loblaw Companies or give up 3.1% of portfolio value over 90 days.

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

Loblaw Companies  vs.  Quebecor

Loblaw Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loblaw Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Loblaw Companies is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Quebecor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quebecor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Quebecor 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 Loblaw Companies and Quebecor

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

The idea behind Loblaw Companies and Quebecor 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.