Correlation Between Maple Leaf and Flinders Resources

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

Diversification Opportunities for Maple Leaf and Flinders Resources

-0.26

Correlation Coefficient

Maple Leaf  Flinders Resources

Very good diversification

The 3 months correlation between Maple and Flinders is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Flinders Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flinders Resources 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 Flinders Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flinders Resources has no effect on the direction of Maple Leaf i.e., Maple Leaf and Flinders Resources go up and down completely randomly.

Pair Corralation between Maple Leaf and Flinders Resources

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the Flinders Resources. But the stock apears to be less risky and, when comparing its historical volatility, Maple Leaf Foods is 2.75 times less risky than Flinders Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Flinders Resources Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  161.00  in Flinders Resources Limited on October 9, 2024 and sell it today you would earn a total of  417.00  from holding Flinders Resources Limited or generate 259.01% 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.  Flinders Resources Limited

Maple Leaf Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maple Leaf Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Flinders Resources

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flinders Resources Limited are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Flinders Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maple Leaf and Flinders Resources

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

The idea behind Maple Leaf Foods and Flinders Resources Limited 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.