Correlation Between Alphabet and Maple Leaf

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

By analyzing existing cross correlation between Alphabet Inc Class C and Maple Leaf Foods, you can compare the effects of market volatilities on Alphabet and Maple Leaf 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 Alphabet with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Maple Leaf.

Diversification Opportunities for Alphabet and Maple Leaf

0.3

Correlation Coefficient

Alphabet  Maple Leaf

Weak diversification

The 3 months correlation between Alphabet and Maple is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Alphabet i.e., Alphabet and Maple Leaf go up and down completely randomly.

Pair Corralation between Alphabet and Maple Leaf

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Maple Leaf. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.1 times less risky than Maple Leaf. The stock trades about -0.02 of its potential returns per unit of risk. The Maple Leaf Foods is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,134  in Maple Leaf Foods on September 2, 2024 and sell it today you would earn a total of  141.00  from holding Maple Leaf Foods or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Alphabet Inc Class C  vs.  Maple Leaf Foods

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Maple Leaf Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Maple Leaf is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Maple Leaf

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

The idea behind Alphabet Inc Class C and Maple Leaf Foods 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.