Correlation Between Maple Leaf and Xtract One

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

Diversification Opportunities for Maple Leaf and Xtract One

0.19

Correlation Coefficient

Maple Leaf  Xtract One

Average diversification

The 3 months correlation between Maple and Xtract is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Xtract One Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtract One Technologies 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 Xtract One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtract One Technologies has no effect on the direction of Maple Leaf i.e., Maple Leaf and Xtract One go up and down completely randomly.

Pair Corralation between Maple Leaf and Xtract One

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.59 times more return on investment than Xtract One. However, Maple Leaf Foods is 1.7 times less risky than Xtract One. It trades about 0.07 of its potential returns per unit of risk. Xtract One Technologies is currently generating about 0.04 per unit of risk. If you would invest  2,196  in Maple Leaf Foods on September 5, 2024 and sell it today you would earn a total of  147.00  from holding Maple Leaf Foods or generate 6.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Maple Leaf Foods  vs.  Xtract One Technologies

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.

Xtract One Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtract One Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Xtract One may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Maple Leaf and Xtract One

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

The idea behind Maple Leaf Foods and Xtract One Technologies 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 Anywhere module to track or share privately all of your investments from the convenience of any device.