Correlation Between Maple Leaf and Plaza Retail

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

Diversification Opportunities for Maple Leaf and Plaza Retail

0.78

Correlation Coefficient

Maple Leaf  Plaza Retail

Poor diversification

The 3 months correlation between Maple and Plaza is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT 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 Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Maple Leaf i.e., Maple Leaf and Plaza Retail go up and down completely randomly.

Pair Corralation between Maple Leaf and Plaza Retail

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 1.8 times more return on investment than Plaza Retail. However, Maple Leaf is 1.8 times more volatile than Plaza Retail REIT. It trades about 0.18 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about 0.13 per unit of risk. If you would invest  1,993  in Maple Leaf Foods on December 25, 2024 and sell it today you would earn a total of  488.00  from holding Maple Leaf Foods or generate 24.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Maple Leaf Foods  vs.  Plaza Retail REIT

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 14 (%) 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.

Plaza Retail REIT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza Retail REIT are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Plaza Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Maple Leaf and Plaza Retail

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

The idea behind Maple Leaf Foods and Plaza Retail REIT 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..