Correlation Between Canon Marketing and General Mills

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

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

Diversification Opportunities for Canon Marketing and General Mills

0.43

Correlation Coefficient

Canon Marketing  General Mills

Very weak diversification

The 3 months correlation between Canon and General is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Canon Marketing Japan and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills and Canon Marketing 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 Canon Marketing Japan are associated (or correlated) with General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Canon Marketing i.e., Canon Marketing and General Mills go up and down completely randomly.

Pair Corralation between Canon Marketing and General Mills

Assuming the 90 days horizon Canon Marketing is expected to generate 1.47 times less return on investment than General Mills. But when comparing it to its historical volatility, Canon Marketing Japan is 1.04 times less risky than General Mills. It trades about 0.12 of its potential returns per unit of risk. General Mills is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,454  in General Mills on September 21, 2024 and sell it today you would earn a total of  1,314  from holding General Mills or generate 17.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Canon Marketing Japan  vs.  General Mills

Canon Marketing Japan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Marketing Japan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canon Marketing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

General Mills

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, General Mills unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canon Marketing and General Mills

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

The idea behind Canon Marketing Japan and General Mills 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .