Correlation Between Canaf Investments and Leons Furniture

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

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

Diversification Opportunities for Canaf Investments and Leons Furniture

-0.27

Correlation Coefficient

Canaf Investments  Leons Furniture

Very good diversification

The 3 months correlation between Canaf and Leons is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Canaf Investments and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Canaf Investments 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 Canaf Investments are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Canaf Investments i.e., Canaf Investments and Leons Furniture go up and down completely randomly.

Pair Corralation between Canaf Investments and Leons Furniture

Assuming the 90 days horizon Canaf Investments is expected to generate 1.6 times more return on investment than Leons Furniture. However, Canaf Investments is 1.6 times more volatile than Leons Furniture Limited. It trades about 0.08 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.06 per unit of risk. If you would invest  10.00  in Canaf Investments on September 26, 2024 and sell it today you would earn a total of  19.00  from holding Canaf Investments or generate 190.0% return on investment over 90 days.

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

Canaf Investments  vs.  Leons Furniture Limited

Canaf Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Canaf Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canaf Investments and Leons Furniture

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

The idea behind Canaf Investments and Leons Furniture 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.