Correlation Between Maple Leaf and Postmedia Network

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

Diversification Opportunities for Maple Leaf and Postmedia Network

-0.53

Correlation Coefficient

Maple Leaf  Postmedia Network

Excellent diversification

The 3 months correlation between Maple and Postmedia is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Maple Leaf i.e., Maple Leaf and Postmedia Network go up and down completely randomly.

Pair Corralation between Maple Leaf and Postmedia Network

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.61 times more return on investment than Postmedia Network. However, Maple Leaf Foods is 1.64 times less risky than Postmedia Network. It trades about 0.06 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.1 per unit of risk. If you would invest  2,314  in Maple Leaf Foods on December 5, 2024 and sell it today you would earn a total of  148.00  from holding Maple Leaf Foods or generate 6.4% return on investment over 90 days.

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

Maple Leaf Foods  vs.  Postmedia Network Canada

Maple Leaf Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Maple Leaf may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Postmedia Network Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Postmedia Network Canada 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Maple Leaf and Postmedia Network

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

The idea behind Maple Leaf Foods and Postmedia Network Canada 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.