Correlation Between Maple Leaf and Mesabi Trust

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

By analyzing existing cross correlation between Maple Leaf Green and Mesabi Trust, you can compare the effects of market volatilities on Maple Leaf and Mesabi Trust 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 Mesabi Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Mesabi Trust.

Diversification Opportunities for Maple Leaf and Mesabi Trust

-0.5

Correlation Coefficient

Maple Leaf  Mesabi Trust

Very good diversification

The 3 months correlation between Maple and Mesabi is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Green and Mesabi Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesabi Trust 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 Green are associated (or correlated) with Mesabi Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesabi Trust has no effect on the direction of Maple Leaf i.e., Maple Leaf and Mesabi Trust go up and down completely randomly.

Pair Corralation between Maple Leaf and Mesabi Trust

Assuming the 90 days horizon Maple Leaf Green is expected to generate 6.11 times more return on investment than Mesabi Trust. However, Maple Leaf is 6.11 times more volatile than Mesabi Trust. It trades about 0.07 of its potential returns per unit of risk. Mesabi Trust is currently generating about 0.17 per unit of risk. If you would invest  3.20  in Maple Leaf Green on September 23, 2024 and sell it today you would lose (0.30) from holding Maple Leaf Green or give up 9.37% of portfolio value over 90 days.

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

Maple Leaf Green  vs.  Mesabi Trust

Maple Leaf Green

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Green are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Maple Leaf reported solid returns over the last few months and may actually be approaching a breakup point.

Mesabi Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maple Leaf and Mesabi Trust

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

The idea behind Maple Leaf Green and Mesabi Trust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.