Correlation Between Maple Leaf and Cobalt Power

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

Diversification Opportunities for Maple Leaf and Cobalt Power

-0.24

Correlation Coefficient

Maple Leaf  Cobalt Power

Very good diversification

The 3 months correlation between Maple and Cobalt is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Cobalt Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobalt Power 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 Cobalt Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobalt Power Group has no effect on the direction of Maple Leaf i.e., Maple Leaf and Cobalt Power go up and down completely randomly.

Pair Corralation between Maple Leaf and Cobalt Power

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the Cobalt Power. But the stock apears to be less risky and, when comparing its historical volatility, Maple Leaf Foods is 5.94 times less risky than Cobalt Power. The stock trades about -0.26 of its potential returns per unit of risk. The Cobalt Power Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Cobalt Power Group on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Cobalt Power Group or generate 0.0% 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.  Cobalt Power 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.

Cobalt Power Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cobalt Power Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Maple Leaf and Cobalt Power

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

The idea behind Maple Leaf Foods and Cobalt Power 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.