Correlation Between Maple Leaf and KDA

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

Diversification Opportunities for Maple Leaf and KDA

0.08

Correlation Coefficient

Maple Leaf  KDA

Significant diversification

The 3 months correlation between Maple and KDA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and KDA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDA Group 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 KDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDA Group has no effect on the direction of Maple Leaf i.e., Maple Leaf and KDA go up and down completely randomly.

Pair Corralation between Maple Leaf and KDA

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.46 times more return on investment than KDA. However, Maple Leaf Foods is 2.18 times less risky than KDA. It trades about 0.2 of its potential returns per unit of risk. KDA Group is currently generating about -0.03 per unit of risk. If you would invest  1,949  in Maple Leaf Foods on December 28, 2024 and sell it today you would earn a total of  555.00  from holding Maple Leaf Foods or generate 28.48% 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.  KDA Group

Maple Leaf Foods

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 16 (%) 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.

KDA Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days KDA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Maple Leaf and KDA

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

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