Correlation Between Taiga Building and Reitmans (Canada)

Can any of the company-specific risk be diversified away by investing in both Taiga Building and Reitmans (Canada) 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 Taiga Building and Reitmans (Canada) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taiga Building Products and Reitmans Limited, you can compare the effects of market volatilities on Taiga Building and Reitmans (Canada) 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 Taiga Building with a short position of Reitmans (Canada). Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiga Building and Reitmans (Canada).

Diversification Opportunities for Taiga Building and Reitmans (Canada)

-0.16

Correlation Coefficient

Taiga Building  Reitmans (Canada)

Good diversification

The 3 months correlation between Taiga and Reitmans is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Taiga Building Products and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans (Canada) and Taiga Building 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 Taiga Building Products are associated (or correlated) with Reitmans (Canada). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans (Canada) has no effect on the direction of Taiga Building i.e., Taiga Building and Reitmans (Canada) go up and down completely randomly.

Pair Corralation between Taiga Building and Reitmans (Canada)

Assuming the 90 days trading horizon Taiga Building Products is expected to generate 0.65 times more return on investment than Reitmans (Canada). However, Taiga Building Products is 1.53 times less risky than Reitmans (Canada). It trades about -0.03 of its potential returns per unit of risk. Reitmans Limited is currently generating about -0.03 per unit of risk. If you would invest  388.00  in Taiga Building Products on December 22, 2024 and sell it today you would lose (10.00) from holding Taiga Building Products or give up 2.58% of portfolio value over 90 days.

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

Taiga Building Products  vs.  Reitmans Limited

Taiga Building Products

Risk-Adjusted Performance

Very Weak

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

Reitmans (Canada)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Reitmans (Canada) is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Taiga Building and Reitmans (Canada)

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

The idea behind Taiga Building Products and Reitmans Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.