Correlation Between Shopify and SNC Lavalin

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

By analyzing existing cross correlation between Shopify and SNC Lavalin Group, you can compare the effects of market volatilities on Shopify and SNC Lavalin 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 Shopify with a short position of SNC Lavalin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and SNC Lavalin.

Diversification Opportunities for Shopify and SNC Lavalin

0.82

Correlation Coefficient

Shopify  SNC Lavalin

Very poor diversification

The 3 months correlation between Shopify and SNC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and SNC Lavalin Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNC Lavalin Group and Shopify 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 Shopify are associated (or correlated) with SNC Lavalin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNC Lavalin Group has no effect on the direction of Shopify i.e., Shopify and SNC Lavalin go up and down completely randomly.

Pair Corralation between Shopify and SNC Lavalin

Assuming the 90 days trading horizon Shopify is expected to under-perform the SNC Lavalin. In addition to that, Shopify is 1.72 times more volatile than SNC Lavalin Group. It trades about -0.06 of its total potential returns per unit of risk. SNC Lavalin Group is currently generating about -0.03 per unit of volatility. If you would invest  7,602  in SNC Lavalin Group on September 30, 2024 and sell it today you would lose (78.00) from holding SNC Lavalin Group or give up 1.03% of portfolio value over 90 days.

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

Shopify  vs.  SNC Lavalin Group

Shopify

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Shopify displayed solid returns over the last few months and may actually be approaching a breakup point.

SNC Lavalin Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SNC Lavalin Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SNC Lavalin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and SNC Lavalin

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

The idea behind Shopify and SNC Lavalin Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.