Correlation Between Canlan Ice and Marchex

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

By analyzing existing cross correlation between Canlan Ice Sports and Marchex, you can compare the effects of market volatilities on Canlan Ice and Marchex 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 Canlan Ice with a short position of Marchex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canlan Ice and Marchex.

Diversification Opportunities for Canlan Ice and Marchex

0.03

Correlation Coefficient

Canlan Ice  Marchex

Significant diversification

The 3 months correlation between Canlan and Marchex is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and Canlan Ice 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 Canlan Ice Sports are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Canlan Ice i.e., Canlan Ice and Marchex go up and down completely randomly.

Pair Corralation between Canlan Ice and Marchex

Assuming the 90 days horizon Canlan Ice is expected to generate 9.1 times less return on investment than Marchex. But when comparing it to its historical volatility, Canlan Ice Sports is 24.6 times less risky than Marchex. It trades about 0.17 of its potential returns per unit of risk. Marchex is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Marchex on September 22, 2024 and sell it today you would earn a total of  21.00  from holding Marchex or generate 11.8% return on investment over 90 days.

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

Canlan Ice Sports  vs.  Marchex

Canlan Ice Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Marchex

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canlan Ice and Marchex

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

The idea behind Canlan Ice Sports and Marchex 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.