Correlation Between Premium Brands and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Premium Brands and Maple Leaf 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 Premium Brands and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premium Brands Holdings and Maple Leaf Foods, you can compare the effects of market volatilities on Premium Brands and Maple Leaf 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 Premium Brands with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Brands and Maple Leaf.
Diversification Opportunities for Premium Brands and Maple Leaf
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Premium and Maple is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Premium Brands i.e., Premium Brands and Maple Leaf go up and down completely randomly.
Pair Corralation between Premium Brands and Maple Leaf
Assuming the 90 days horizon Premium Brands is expected to generate 3.1 times less return on investment than Maple Leaf. But when comparing it to its historical volatility, Premium Brands Holdings is 1.52 times less risky than Maple Leaf. It trades about 0.18 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,445 in Maple Leaf Foods on December 4, 2024 and sell it today you would earn a total of 309.00 from holding Maple Leaf Foods or generate 21.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Premium Brands Holdings vs. Maple Leaf Foods
Performance |
Timeline |
Premium Brands Holdings |
Maple Leaf Foods |
Premium Brands and Maple Leaf Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Premium Brands and Maple Leaf
The main advantage of trading using opposite Premium Brands and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Brands position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.Premium Brands vs. Maple Leaf Foods | Premium Brands vs. Power of | Premium Brands vs. The North West | Premium Brands vs. Badger Infrastructure Solutions |
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Check out your portfolio center.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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