Correlation Between MTY Food and TC Energy

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

Diversification Opportunities for MTY Food and TC Energy

0.51

Correlation Coefficient

MTY Food  TC Energy

Very weak diversification

The 3 months correlation between MTY and TRP-PF is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of MTY Food i.e., MTY Food and TC Energy go up and down completely randomly.

Pair Corralation between MTY Food and TC Energy

Assuming the 90 days trading horizon MTY Food Group is expected to under-perform the TC Energy. In addition to that, MTY Food is 1.77 times more volatile than TC Energy Corp. It trades about -0.24 of its total potential returns per unit of risk. TC Energy Corp is currently generating about 0.08 per unit of volatility. If you would invest  1,779  in TC Energy Corp on October 12, 2024 and sell it today you would earn a total of  21.00  from holding TC Energy Corp or generate 1.18% return on investment over 90 days.

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

MTY Food Group  vs.  TC Energy Corp

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.

TC Energy Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MTY Food and TC Energy

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

The idea behind MTY Food Group and TC Energy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.