Correlation Between Postmedia Network and Stantec

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

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

Diversification Opportunities for Postmedia Network and Stantec

-0.55

Correlation Coefficient

Postmedia Network  Stantec

Excellent diversification

The 3 months correlation between Postmedia and Stantec is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec and Postmedia Network 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 Postmedia Network Canada are associated (or correlated) with Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Postmedia Network i.e., Postmedia Network and Stantec go up and down completely randomly.

Pair Corralation between Postmedia Network and Stantec

Assuming the 90 days trading horizon Postmedia Network Canada is expected to generate 2.11 times more return on investment than Stantec. However, Postmedia Network is 2.11 times more volatile than Stantec. It trades about 0.02 of its potential returns per unit of risk. Stantec is currently generating about 0.01 per unit of risk. If you would invest  123.00  in Postmedia Network Canada on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Postmedia Network Canada or generate 0.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.46%
Values	Daily Returns

Postmedia Network Canada  vs.  Stantec

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.

Stantec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Postmedia Network and Stantec

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

The idea behind Postmedia Network Canada and Stantec 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.