Correlation Between Maple Leaf and Rover Metals

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

Diversification Opportunities for Maple Leaf and Rover Metals

-0.03

Correlation Coefficient

Maple Leaf  Rover Metals

Good diversification

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

Pair Corralation between Maple Leaf and Rover Metals

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.12 times more return on investment than Rover Metals. However, Maple Leaf Foods is 8.66 times less risky than Rover Metals. It trades about -0.04 of its potential returns per unit of risk. Rover Metals Corp is currently generating about -0.01 per unit of risk. If you would invest  2,149  in Maple Leaf Foods on September 23, 2024 and sell it today you would lose (115.00) from holding Maple Leaf Foods or give up 5.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Maple Leaf Foods  vs.  Rover Metals Corp

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.

Rover Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rover Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Maple Leaf and Rover Metals

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

The idea behind Maple Leaf Foods and Rover Metals Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.