Correlation Between Maple Leaf and Guru Organic

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

Diversification Opportunities for Maple Leaf and Guru Organic

0.03

Correlation Coefficient

Maple Leaf  Guru Organic

Significant diversification

The 3 months correlation between Maple and Guru is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Guru Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Organic Energy 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 Guru Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Organic Energy has no effect on the direction of Maple Leaf i.e., Maple Leaf and Guru Organic go up and down completely randomly.

Pair Corralation between Maple Leaf and Guru Organic

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.46 times more return on investment than Guru Organic. However, Maple Leaf Foods is 2.17 times less risky than Guru Organic. It trades about 0.05 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.03 per unit of risk. If you would invest  2,168  in Maple Leaf Foods on September 12, 2024 and sell it today you would earn a total of  92.00  from holding Maple Leaf Foods or generate 4.24% return on investment over 90 days.

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

Maple Leaf Foods  vs.  Guru Organic Energy

Maple Leaf Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 3 (%) 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.

Guru Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guru Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Guru Organic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Maple Leaf and Guru Organic

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

The idea behind Maple Leaf Foods and Guru Organic Energy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.