Correlation Between Maple Leaf and Helios Fairfax

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

Diversification Opportunities for Maple Leaf and Helios Fairfax

-0.25

Correlation Coefficient

Maple Leaf  Helios Fairfax

Very good diversification

The 3 months correlation between Maple and Helios is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Helios Fairfax Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Fairfax Partners 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 Helios Fairfax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Fairfax Partners has no effect on the direction of Maple Leaf i.e., Maple Leaf and Helios Fairfax go up and down completely randomly.

Pair Corralation between Maple Leaf and Helios Fairfax

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.46 times more return on investment than Helios Fairfax. However, Maple Leaf Foods is 2.15 times less risky than Helios Fairfax. It trades about 0.17 of its potential returns per unit of risk. Helios Fairfax Partners is currently generating about -0.03 per unit of risk. If you would invest  2,013  in Maple Leaf Foods on December 23, 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.  Helios Fairfax Partners

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 unfluctuating forward indicators, Maple Leaf displayed solid returns over the last few months and may actually be approaching a breakup point.

Helios Fairfax Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Helios Fairfax Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Maple Leaf and Helios Fairfax

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

The idea behind Maple Leaf Foods and Helios Fairfax Partners 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.