Correlation Between MTY Food and Postmedia Network

Can any of the company-specific risk be diversified away by investing in both MTY Food 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 MTY Food and Postmedia Network into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTY Food Group and Postmedia Network Canada, you can compare the effects of market volatilities on MTY Food 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 MTY Food with a short position of Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTY Food and Postmedia Network.

Diversification Opportunities for MTY Food and Postmedia Network

-0.38

Correlation Coefficient

MTY Food  Postmedia Network

Very good diversification

The 3 months correlation between MTY and Postmedia is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group 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 MTY Food 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 MTY Food Group 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 MTY Food i.e., MTY Food and Postmedia Network go up and down completely randomly.

Pair Corralation between MTY Food and Postmedia Network

Assuming the 90 days trading horizon MTY Food Group is expected to under-perform the Postmedia Network. But the stock apears to be less risky and, when comparing its historical volatility, MTY Food Group is 2.51 times less risky than Postmedia Network. The stock trades about -0.2 of its potential returns per unit of risk. The Postmedia Network Canada is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Postmedia Network Canada on October 5, 2024 and sell it today you would earn a total of  5.00  from holding Postmedia Network Canada or generate 4.2% return on investment over 90 days.

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

MTY Food Group  vs.  Postmedia Network Canada

MTY Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTY Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MTY Food is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MTY Food and Postmedia Network

The main advantage of trading using opposite MTY Food and Postmedia Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTY Food 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 MTY Food Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.