Correlation Between Maple Leaf and MTY Food

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

Diversification Opportunities for Maple Leaf and MTY Food

0.41

Correlation Coefficient

Maple Leaf  MTY Food

Very weak diversification

The 3 months correlation between Maple and MTY is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food 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 MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of Maple Leaf i.e., Maple Leaf and MTY Food go up and down completely randomly.

Pair Corralation between Maple Leaf and MTY Food

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the MTY Food. But the stock apears to be less risky and, when comparing its historical volatility, Maple Leaf Foods is 1.02 times less risky than MTY Food. The stock trades about -0.4 of its potential returns per unit of risk. The MTY Food Group is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  4,884  in MTY Food Group on October 9, 2024 and sell it today you would lose (149.00) from holding MTY Food Group or give up 3.05% of portfolio value over 90 days.

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

Maple Leaf Foods  vs.  MTY Food Group

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 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.

MTY Food Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MTY Food 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 MTY Food

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

The idea behind Maple Leaf Foods and MTY Food 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.