Correlation Between Regional Container and Crown Seal

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

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

Diversification Opportunities for Regional Container and Crown Seal

0.52

Correlation Coefficient

Regional Container  Crown Seal

Very weak diversification

The 3 months correlation between Regional and Crown is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines 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 Regional Container 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 Regional Container Lines 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 Regional Container i.e., Regional Container and Crown Seal go up and down completely randomly.

Pair Corralation between Regional Container and Crown Seal

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 3.55 times more return on investment than Crown Seal. However, Regional Container is 3.55 times more volatile than Crown Seal Public. It trades about 0.05 of its potential returns per unit of risk. Crown Seal Public is currently generating about 0.0 per unit of risk. If you would invest  2,365  in Regional Container Lines on October 24, 2024 and sell it today you would earn a total of  160.00  from holding Regional Container Lines or generate 6.77% return on investment over 90 days.

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

Regional Container Lines  vs.  Crown Seal Public

Regional Container Lines

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Regional Container may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Crown Seal Public

Risk-Adjusted Performance

0 of 100

Very 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Regional Container and Crown Seal

The main advantage of trading using opposite Regional Container and Crown Seal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Container 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 Regional Container Lines 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.