Correlation Between George Weston and Rocky Mountain

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

By analyzing existing cross correlation between George Weston 475 and Rocky Mountain Liquor, you can compare the effects of market volatilities on George Weston and Rocky Mountain 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 Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of George Weston and Rocky Mountain.

Diversification Opportunities for George Weston and Rocky Mountain

-0.44

Correlation Coefficient

George Weston  Rocky Mountain

Very good diversification

The 3 months correlation between George and Rocky is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding George Weston 475 and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor 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 475 are associated (or correlated) with Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of George Weston i.e., George Weston and Rocky Mountain go up and down completely randomly.

Pair Corralation between George Weston and Rocky Mountain

Assuming the 90 days trading horizon George Weston is expected to generate 3.73 times less return on investment than Rocky Mountain. But when comparing it to its historical volatility, George Weston 475 is 6.07 times less risky than Rocky Mountain. It trades about 0.09 of its potential returns per unit of risk. Rocky Mountain Liquor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Rocky Mountain Liquor on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Rocky Mountain Liquor or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

George Weston 475  vs.  Rocky Mountain Liquor

George Weston 475

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston 475 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, George Weston is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Rocky Mountain Liquor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Liquor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Rocky Mountain showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with George Weston and Rocky Mountain

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

The idea behind George Weston 475 and Rocky Mountain Liquor 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.