Correlation Between Maple Leaf and Transatlantic Mining

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

Diversification Opportunities for Maple Leaf and Transatlantic Mining

0.63

Correlation Coefficient

Maple Leaf  Transatlantic Mining

Poor diversification

The 3 months correlation between Maple and Transatlantic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Transatlantic Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transatlantic Mining 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 Transatlantic Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transatlantic Mining Corp has no effect on the direction of Maple Leaf i.e., Maple Leaf and Transatlantic Mining go up and down completely randomly.

Pair Corralation between Maple Leaf and Transatlantic Mining

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.25 times more return on investment than Transatlantic Mining. However, Maple Leaf Foods is 4.01 times less risky than Transatlantic Mining. It trades about -0.4 of its potential returns per unit of risk. Transatlantic Mining Corp is currently generating about -0.3 per unit of risk. If you would invest  2,312  in Maple Leaf Foods on September 26, 2024 and sell it today you would lose (281.00) from holding Maple Leaf Foods or give up 12.15% of portfolio value over 90 days.

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

Maple Leaf Foods  vs.  Transatlantic Mining Corp

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 latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Transatlantic Mining Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transatlantic Mining Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Transatlantic Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Maple Leaf and Transatlantic Mining

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

The idea behind Maple Leaf Foods and Transatlantic Mining 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.