Correlation Between Canadian General and Sparta Capital

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

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

Diversification Opportunities for Canadian General and Sparta Capital

-0.04

Correlation Coefficient

Canadian General  Sparta Capital

Good diversification

The 3 months correlation between Canadian and Sparta is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Canadian General 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 General Investments are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Canadian General i.e., Canadian General and Sparta Capital go up and down completely randomly.

Pair Corralation between Canadian General and Sparta Capital

Assuming the 90 days trading horizon Canadian General is expected to generate 2.57 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, Canadian General Investments is 7.66 times less risky than Sparta Capital. It trades about 0.08 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sparta Capital on September 4, 2024 and sell it today you would lose (0.50) from holding Sparta Capital or give up 25.0% of portfolio value over 90 days.

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

Canadian General Investments  vs.  Sparta Capital

Canadian General Inv

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Canadian General and Sparta Capital

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

The idea behind Canadian General Investments and Sparta Capital 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.