Correlation Between Maple Leaf and Cogeco Communications

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

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

Diversification Opportunities for Maple Leaf and Cogeco Communications

0.34

Correlation Coefficient

Maple Leaf  Cogeco Communications

Weak diversification

The 3 months correlation between Maple and Cogeco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications and Maple Leaf 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 Maple Leaf Foods are associated (or correlated) with Cogeco Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogeco Communications has no effect on the direction of Maple Leaf i.e., Maple Leaf and Cogeco Communications go up and down completely randomly.

Pair Corralation between Maple Leaf and Cogeco Communications

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the Cogeco Communications. In addition to that, Maple Leaf is 1.21 times more volatile than Cogeco Communications. It trades about -0.02 of its total potential returns per unit of risk. Cogeco Communications is currently generating about 0.01 per unit of volatility. If you would invest  6,659  in Cogeco Communications on September 19, 2024 and sell it today you would earn a total of  21.00  from holding Cogeco Communications or generate 0.32% return on investment over 90 days.

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

Maple Leaf Foods  vs.  Cogeco Communications

Maple Leaf Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maple Leaf Foods has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Cogeco Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogeco Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cogeco Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Maple Leaf and Cogeco Communications

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

The idea behind Maple Leaf Foods and Cogeco Communications 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.