Correlation Between Legend Power and Reitmans Canada

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

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

Diversification Opportunities for Legend Power and Reitmans Canada

0.49

Correlation Coefficient

Legend Power  Reitmans Canada

Very weak diversification

The 3 months correlation between Legend and Reitmans is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Legend Power Systems and Reitmans Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans Canada and Legend Power 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 Legend Power Systems are associated (or correlated) with Reitmans Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans Canada has no effect on the direction of Legend Power i.e., Legend Power and Reitmans Canada go up and down completely randomly.

Pair Corralation between Legend Power and Reitmans Canada

Assuming the 90 days horizon Legend Power Systems is expected to under-perform the Reitmans Canada. In addition to that, Legend Power is 1.26 times more volatile than Reitmans Canada. It trades about -0.05 of its total potential returns per unit of risk. Reitmans Canada is currently generating about -0.04 per unit of volatility. If you would invest  275.00  in Reitmans Canada on December 22, 2024 and sell it today you would lose (37.00) from holding Reitmans Canada or give up 13.45% of portfolio value over 90 days.

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

Legend Power Systems  vs.  Reitmans Canada

Legend Power Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Legend Power Systems 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Reitmans Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reitmans Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Legend Power and Reitmans Canada

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

The idea behind Legend Power Systems and Reitmans 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..