Correlation Between Maple Leaf and Enbridge D

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

By analyzing existing cross correlation between Maple Leaf Foods and Enbridge D Cum, you can compare the effects of market volatilities on Maple Leaf and Enbridge D 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 Maple Leaf with a short position of Enbridge D. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Enbridge D.

Diversification Opportunities for Maple Leaf and Enbridge D

-0.02

Correlation Coefficient

Maple Leaf  Enbridge D

Good diversification

The 3 months correlation between Maple and Enbridge is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Enbridge D Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge D Cum and Maple Leaf 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 Maple Leaf Foods are associated (or correlated) with Enbridge D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge D Cum has no effect on the direction of Maple Leaf i.e., Maple Leaf and Enbridge D go up and down completely randomly.

Pair Corralation between Maple Leaf and Enbridge D

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 4.21 times more return on investment than Enbridge D. However, Maple Leaf is 4.21 times more volatile than Enbridge D Cum. It trades about 0.17 of its potential returns per unit of risk. Enbridge D Cum is currently generating about 0.06 per unit of risk. If you would invest  2,013  in Maple Leaf Foods on December 22, 2024 and sell it today you would earn a total of  479.00  from holding Maple Leaf Foods or generate 23.8% return on investment over 90 days.

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

Maple Leaf Foods  vs.  Enbridge D Cum

Maple Leaf Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Maple Leaf displayed solid returns over the last few months and may actually be approaching a breakup point.

Enbridge D Cum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge D Cum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge D is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Maple Leaf and Enbridge D

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

The idea behind Maple Leaf Foods and Enbridge D Cum 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.