Correlation Between Canso Credit and Blue Ribbon

Can any of the company-specific risk be diversified away by investing in both Canso Credit and Blue Ribbon 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 Canso Credit and Blue Ribbon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canso Credit Trust and Blue Ribbon Income, you can compare the effects of market volatilities on Canso Credit and Blue Ribbon 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 Canso Credit with a short position of Blue Ribbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canso Credit and Blue Ribbon.

Diversification Opportunities for Canso Credit and Blue Ribbon

-0.7

Correlation Coefficient

Canso Credit  Blue Ribbon

Excellent diversification

The 3 months correlation between Canso and Blue is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit Trust and Blue Ribbon Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Ribbon Income and Canso Credit 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 Canso Credit Trust are associated (or correlated) with Blue Ribbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Ribbon Income has no effect on the direction of Canso Credit i.e., Canso Credit and Blue Ribbon go up and down completely randomly.

Pair Corralation between Canso Credit and Blue Ribbon

Assuming the 90 days trading horizon Canso Credit Trust is expected to generate 0.42 times more return on investment than Blue Ribbon. However, Canso Credit Trust is 2.38 times less risky than Blue Ribbon. It trades about 0.03 of its potential returns per unit of risk. Blue Ribbon Income is currently generating about -0.12 per unit of risk. If you would invest  1,580  in Canso Credit Trust on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Canso Credit Trust or generate 1.14% return on investment over 90 days.

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

Canso Credit Trust  vs.  Blue Ribbon Income

Canso Credit Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blue Ribbon Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blue Ribbon Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Canso Credit and Blue Ribbon

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

The idea behind Canso Credit Trust and Blue Ribbon Income 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.