Correlation Between Canso Credit and Maple Leaf

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

Diversification Opportunities for Canso Credit and Maple Leaf

0.01

Correlation Coefficient

Canso Credit  Maple Leaf

Significant diversification

The 3 months correlation between Canso and Maple is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit Trust and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods 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 Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Canso Credit i.e., Canso Credit and Maple Leaf go up and down completely randomly.

Pair Corralation between Canso Credit and Maple Leaf

Assuming the 90 days trading horizon Canso Credit Trust is expected to generate 0.23 times more return on investment than Maple Leaf. However, Canso Credit Trust is 4.41 times less risky than Maple Leaf. It trades about 0.37 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about -0.4 per unit of risk. If you would invest  1,546  in Canso Credit Trust on September 25, 2024 and sell it today you would earn a total of  41.00  from holding Canso Credit Trust or generate 2.65% return on investment over 90 days.

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

Canso Credit Trust  vs.  Maple Leaf Foods

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.

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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canso Credit and Maple Leaf

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

The idea behind Canso Credit Trust and Maple Leaf Foods 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.