Correlation Between Canso Credit and Canadian Utilities

Can any of the company-specific risk be diversified away by investing in both Canso Credit and Canadian Utilities 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 Canso Credit and Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canso Credit Trust and Canadian Utilities Ltd, you can compare the effects of market volatilities on Canso Credit and Canadian Utilities 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 Canso Credit with a short position of Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canso Credit and Canadian Utilities.

Diversification Opportunities for Canso Credit and Canadian Utilities

-0.04

Correlation Coefficient

Canso Credit  Canadian Utilities

Good diversification

The 3 months correlation between Canso and Canadian is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit Trust and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and Canso Credit 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 Canso Credit Trust are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Canso Credit i.e., Canso Credit and Canadian Utilities go up and down completely randomly.

Pair Corralation between Canso Credit and Canadian Utilities

Assuming the 90 days trading horizon Canso Credit Trust is expected to generate 0.55 times more return on investment than Canadian Utilities. However, Canso Credit Trust is 1.81 times less risky than Canadian Utilities. It trades about 0.19 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about -0.01 per unit of risk. If you would invest  1,522  in Canso Credit Trust on September 26, 2024 and sell it today you would earn a total of  71.00  from holding Canso Credit Trust or generate 4.66% return on investment over 90 days.

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

Canso Credit Trust  vs.  Canadian Utilities Ltd

Canso Credit Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Canso Credit and Canadian Utilities

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

The idea behind Canso Credit Trust and Canadian Utilities Ltd 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 Stocks Directory module to find actively traded stocks across global markets.