Correlation Between Morguard North and Canadian Apartment

Can any of the company-specific risk be diversified away by investing in both Morguard North and Canadian Apartment 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 Morguard North and Canadian Apartment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morguard North American and Canadian Apartment Properties, you can compare the effects of market volatilities on Morguard North and Canadian Apartment 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 Morguard North with a short position of Canadian Apartment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morguard North and Canadian Apartment.

Diversification Opportunities for Morguard North and Canadian Apartment

0.67

Correlation Coefficient

Morguard North  Canadian Apartment

Poor diversification

The 3 months correlation between Morguard and Canadian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Morguard North American and Canadian Apartment Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Apartment and Morguard North 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 Morguard North American are associated (or correlated) with Canadian Apartment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Apartment has no effect on the direction of Morguard North i.e., Morguard North and Canadian Apartment go up and down completely randomly.

Pair Corralation between Morguard North and Canadian Apartment

Assuming the 90 days trading horizon Morguard North American is expected to generate 1.02 times more return on investment than Canadian Apartment. However, Morguard North is 1.02 times more volatile than Canadian Apartment Properties. It trades about -0.05 of its potential returns per unit of risk. Canadian Apartment Properties is currently generating about -0.2 per unit of risk. If you would invest  1,840  in Morguard North American on October 10, 2024 and sell it today you would lose (83.00) from holding Morguard North American or give up 4.51% of portfolio value over 90 days.

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

Morguard North American  vs.  Canadian Apartment Properties

Morguard North American

Risk-Adjusted Performance

0 of 100

Very Weak

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

Canadian Apartment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Apartment Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Morguard North and Canadian Apartment

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

The idea behind Morguard North American and Canadian Apartment Properties 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.