Correlation Between Maple Leaf and Equity Metals

Can any of the company-specific risk be diversified away by investing in both Maple Leaf and Equity Metals 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 Equity Metals 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 Equity Metals Corp, you can compare the effects of market volatilities on Maple Leaf and Equity Metals 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 Equity Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Equity Metals.

Diversification Opportunities for Maple Leaf and Equity Metals

-0.63

Correlation Coefficient

Maple Leaf  Equity Metals

Excellent diversification

The 3 months correlation between Maple and Equity is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Equity Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Metals Corp 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 Equity Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Metals Corp has no effect on the direction of Maple Leaf i.e., Maple Leaf and Equity Metals go up and down completely randomly.

Pair Corralation between Maple Leaf and Equity Metals

Assuming the 90 days trading horizon Maple Leaf is expected to generate 15.68 times less return on investment than Equity Metals. But when comparing it to its historical volatility, Maple Leaf Foods is 3.83 times less risky than Equity Metals. It trades about 0.01 of its potential returns per unit of risk. Equity Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Equity Metals Corp on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Equity Metals Corp or generate 16.67% return on investment over 90 days.

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

Maple Leaf Foods  vs.  Equity Metals Corp

Maple Leaf Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Maple Leaf is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Equity Metals Corp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Equity Metals is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Maple Leaf and Equity Metals

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

The idea behind Maple Leaf Foods and Equity Metals Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.