Correlation Between Stantec and MDA

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

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

Diversification Opportunities for Stantec and MDA

0.05

Correlation Coefficient

Stantec  MDA

Significant diversification

The 3 months correlation between Stantec and MDA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Stantec and MDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDA and Stantec 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 Stantec are associated (or correlated) with MDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDA has no effect on the direction of Stantec i.e., Stantec and MDA go up and down completely randomly.

Pair Corralation between Stantec and MDA

Assuming the 90 days trading horizon Stantec is expected to generate 0.52 times more return on investment than MDA. However, Stantec is 1.94 times less risky than MDA. It trades about 0.05 of its potential returns per unit of risk. MDA is currently generating about 0.01 per unit of risk. If you would invest  11,349  in Stantec on December 26, 2024 and sell it today you would earn a total of  613.00  from holding Stantec or generate 5.4% return on investment over 90 days.

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

Stantec  vs.  MDA

Stantec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Stantec may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MDA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MDA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MDA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stantec and MDA

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

The idea behind Stantec and MDA 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.