Correlation Between Canadian TireLimited and MeVis Medical

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

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

Diversification Opportunities for Canadian TireLimited and MeVis Medical

0.22

Correlation Coefficient

Canadian TireLimited  MeVis Medical

Modest diversification

The 3 months correlation between Canadian and MeVis is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Tire and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions and Canadian TireLimited 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 Canadian Tire are associated (or correlated) with MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of Canadian TireLimited i.e., Canadian TireLimited and MeVis Medical go up and down completely randomly.

Pair Corralation between Canadian TireLimited and MeVis Medical

Assuming the 90 days trading horizon Canadian Tire is expected to generate 1.08 times more return on investment than MeVis Medical. However, Canadian TireLimited is 1.08 times more volatile than MeVis Medical Solutions. It trades about 0.03 of its potential returns per unit of risk. MeVis Medical Solutions is currently generating about -0.04 per unit of risk. If you would invest  9,262  in Canadian Tire on October 12, 2024 and sell it today you would earn a total of  1,378  from holding Canadian Tire or generate 14.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Canadian Tire  vs.  MeVis Medical Solutions

Canadian TireLimited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Tire are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian TireLimited is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MeVis Medical Solutions

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MeVis Medical Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MeVis Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Canadian TireLimited and MeVis Medical

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

The idea behind Canadian Tire and MeVis Medical Solutions 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.