Correlation Between Maple Leaf and First National

Can any of the company-specific risk be diversified away by investing in both Maple Leaf and First National 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 First National 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 First National Financial, you can compare the effects of market volatilities on Maple Leaf and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and First National.

Diversification Opportunities for Maple Leaf and First National

-0.01

Correlation Coefficient

Maple Leaf  First National

Good diversification

The 3 months correlation between Maple and First is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Maple Leaf i.e., Maple Leaf and First National go up and down completely randomly.

Pair Corralation between Maple Leaf and First National

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the First National. In addition to that, Maple Leaf is 1.4 times more volatile than First National Financial. It trades about -0.04 of its total potential returns per unit of risk. First National Financial is currently generating about 0.07 per unit of volatility. If you would invest  1,431  in First National Financial on September 25, 2024 and sell it today you would earn a total of  144.00  from holding First National Financial or generate 10.06% return on investment over 90 days.

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

Maple Leaf Foods  vs.  First National Financial

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 newest stock price disarray, may contribute to short-term losses for the investors.

First National Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Maple Leaf and First National

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

The idea behind Maple Leaf Foods and First National Financial 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.