Correlation Between George Weston and Empire Company

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

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

Diversification Opportunities for George Weston and Empire Company

-0.16

Correlation Coefficient

George Weston  Empire Company

Good diversification

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

Pair Corralation between George Weston and Empire Company

Assuming the 90 days trading horizon George Weston Ser is expected to under-perform the Empire Company. But the preferred stock apears to be less risky and, when comparing its historical volatility, George Weston Ser is 2.12 times less risky than Empire Company. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Empire Company Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,771  in Empire Company Limited on September 2, 2024 and sell it today you would earn a total of  427.00  from holding Empire Company Limited or generate 11.32% return on investment over 90 days.

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

George Weston Ser  vs.  Empire Company Limited

George Weston Ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days George Weston Ser has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, George Weston is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Empire Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Empire Company may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with George Weston and Empire Company

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

The idea behind George Weston Ser and Empire Company 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.