Correlation Between Loblaw Companies and Eastwood Bio

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

By analyzing existing cross correlation between Loblaw Companies Limited and Eastwood Bio Medical Canada, you can compare the effects of market volatilities on Loblaw Companies and Eastwood Bio 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 Eastwood Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Eastwood Bio.

Diversification Opportunities for Loblaw Companies and Eastwood Bio

-0.27

Correlation Coefficient

Loblaw Companies  Eastwood Bio

Very good diversification

The 3 months correlation between Loblaw and Eastwood is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and Eastwood Bio Medical Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastwood Bio Medical 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 Limited are associated (or correlated) with Eastwood Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastwood Bio Medical has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Eastwood Bio go up and down completely randomly.

Pair Corralation between Loblaw Companies and Eastwood Bio

Given the investment horizon of 90 days Loblaw Companies Limited is expected to under-perform the Eastwood Bio. But the stock apears to be less risky and, when comparing its historical volatility, Loblaw Companies Limited is 14.34 times less risky than Eastwood Bio. The stock trades about -0.28 of its potential returns per unit of risk. The Eastwood Bio Medical Canada is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Eastwood Bio Medical Canada on October 22, 2024 and sell it today you would lose (9.00) from holding Eastwood Bio Medical Canada or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Loblaw Companies Limited  vs.  Eastwood Bio Medical Canada

Loblaw Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loblaw Companies Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Loblaw Companies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Eastwood Bio Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastwood Bio Medical Canada are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eastwood Bio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loblaw Companies and Eastwood Bio

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

The idea behind Loblaw Companies Limited and Eastwood Bio Medical Canada 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.