Correlation Between Leons Furniture and Postmedia Network

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

By analyzing existing cross correlation between Leons Furniture Limited and Postmedia Network Canada, you can compare the effects of market volatilities on Leons Furniture and Postmedia Network 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 Leons Furniture with a short position of Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Postmedia Network.

Diversification Opportunities for Leons Furniture and Postmedia Network

0.59

Correlation Coefficient

Leons Furniture  Postmedia Network

Very weak diversification

The 3 months correlation between Leons and Postmedia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Leons Furniture i.e., Leons Furniture and Postmedia Network go up and down completely randomly.

Pair Corralation between Leons Furniture and Postmedia Network

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Postmedia Network. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 2.51 times less risky than Postmedia Network. The stock trades about -0.17 of its potential returns per unit of risk. The Postmedia Network Canada is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Postmedia Network Canada on October 22, 2024 and sell it today you would lose (2.00) from holding Postmedia Network Canada or give up 1.52% of portfolio value over 90 days.

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

Leons Furniture Limited  vs.  Postmedia Network Canada

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Postmedia Network is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Leons Furniture and Postmedia Network

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

The idea behind Leons Furniture Limited and Postmedia Network 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 Commodity Directory module to find actively traded commodities issued by global exchanges.