Correlation Between North East and Crown Seal

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

By analyzing existing cross correlation between North East Rubbers and Crown Seal Public, you can compare the effects of market volatilities on North East and Crown Seal 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 North East with a short position of Crown Seal. Check out your portfolio center. Please also check ongoing floating volatility patterns of North East and Crown Seal.

Diversification Opportunities for North East and Crown Seal

-0.38

Correlation Coefficient

North East  Crown Seal

Very good diversification

The 3 months correlation between North and Crown is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding North East Rubbers and Crown Seal Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Seal Public and North East 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 North East Rubbers are associated (or correlated) with Crown Seal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Seal Public has no effect on the direction of North East i.e., North East and Crown Seal go up and down completely randomly.

Pair Corralation between North East and Crown Seal

Assuming the 90 days trading horizon North East Rubbers is expected to under-perform the Crown Seal. In addition to that, North East is 1.52 times more volatile than Crown Seal Public. It trades about -0.34 of its total potential returns per unit of risk. Crown Seal Public is currently generating about -0.12 per unit of volatility. If you would invest  4,625  in Crown Seal Public on October 12, 2024 and sell it today you would lose (75.00) from holding Crown Seal Public or give up 1.62% of portfolio value over 90 days.

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

North East Rubbers  vs.  Crown Seal Public

North East Rubbers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North East Rubbers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Crown Seal Public

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Crown Seal Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Crown Seal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with North East and Crown Seal

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

The idea behind North East Rubbers and Crown Seal Public 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.