Correlation Between Maple Leaf and Great West

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

Diversification Opportunities for Maple Leaf and Great West

-0.39

Correlation Coefficient

Maple Leaf  Great West

Very good diversification

The 3 months correlation between Maple and Great is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Maple Leaf i.e., Maple Leaf and Great West go up and down completely randomly.

Pair Corralation between Maple Leaf and Great West

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 3.34 times more return on investment than Great West. However, Maple Leaf is 3.34 times more volatile than Great West Lifeco. It trades about 0.07 of its potential returns per unit of risk. Great West Lifeco is currently generating about -0.14 per unit of risk. If you would invest  2,174  in Maple Leaf Foods on September 6, 2024 and sell it today you would earn a total of  146.00  from holding Maple Leaf Foods or generate 6.72% 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.  Great West Lifeco

Maple Leaf Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Maple Leaf may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Great West Lifeco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Lifeco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great West is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Maple Leaf and Great West

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

The idea behind Maple Leaf Foods and Great West Lifeco 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.