Correlation Between Maple Leaf and Pembina Pipeline

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

Diversification Opportunities for Maple Leaf and Pembina Pipeline

0.37

Correlation Coefficient

Maple Leaf  Pembina Pipeline

Weak diversification

The 3 months correlation between Maple and Pembina is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Maple Leaf i.e., Maple Leaf and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Maple Leaf and Pembina Pipeline

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 4.02 times more return on investment than Pembina Pipeline. However, Maple Leaf is 4.02 times more volatile than Pembina Pipeline Corp. It trades about 0.2 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.12 per unit of risk. If you would invest  1,949  in Maple Leaf Foods on December 30, 2024 and sell it today you would earn a total of  543.00  from holding Maple Leaf Foods or generate 27.86% return on investment over 90 days.

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

Maple Leaf Foods  vs.  Pembina Pipeline Corp

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 15 (%) 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.

Pembina Pipeline Corp

Risk-Adjusted Performance

OK

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Maple Leaf and Pembina Pipeline

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

The idea behind Maple Leaf Foods and Pembina Pipeline Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.