Correlation Between Powerof Canada and Freedom Bank

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

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

Diversification Opportunities for Powerof Canada and Freedom Bank

-0.26

Correlation Coefficient

Powerof Canada  Freedom Bank

Very good diversification

The 3 months correlation between Powerof and Freedom is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Power of and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank and Powerof Canada 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 Power of are associated (or correlated) with Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Powerof Canada i.e., Powerof Canada and Freedom Bank go up and down completely randomly.

Pair Corralation between Powerof Canada and Freedom Bank

Assuming the 90 days horizon Power of is expected to generate 1.92 times more return on investment than Freedom Bank. However, Powerof Canada is 1.92 times more volatile than Freedom Bank of. It trades about 0.14 of its potential returns per unit of risk. Freedom Bank of is currently generating about -0.09 per unit of risk. If you would invest  3,153  in Power of on December 28, 2024 and sell it today you would earn a total of  387.00  from holding Power of or generate 12.27% return on investment over 90 days.

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

Power of  vs.  Freedom Bank of

Powerof Canada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Powerof Canada reported solid returns over the last few months and may actually be approaching a breakup point.

Freedom Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freedom Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freedom Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Powerof Canada and Freedom Bank

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

The idea behind Power of and Freedom Bank of 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.