Correlation Between Stantec and Storage Vault

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

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

Diversification Opportunities for Stantec and Storage Vault

-0.7

Correlation Coefficient

Stantec  Storage Vault

Excellent diversification

The 3 months correlation between Stantec and Storage is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Stantec and Storage Vault Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storage Vault Canada and Stantec 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 Stantec are associated (or correlated) with Storage Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storage Vault Canada has no effect on the direction of Stantec i.e., Stantec and Storage Vault go up and down completely randomly.

Pair Corralation between Stantec and Storage Vault

Assuming the 90 days trading horizon Stantec is expected to under-perform the Storage Vault. But the stock apears to be less risky and, when comparing its historical volatility, Stantec is 1.84 times less risky than Storage Vault. The stock trades about -0.35 of its potential returns per unit of risk. The Storage Vault Canada is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  413.00  in Storage Vault Canada on September 26, 2024 and sell it today you would lose (23.00) from holding Storage Vault Canada or give up 5.57% of portfolio value over 90 days.

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

Stantec  vs.  Storage Vault Canada

Stantec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Stantec is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Storage Vault Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Storage Vault Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Stantec and Storage Vault

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

The idea behind Stantec and Storage Vault Canada 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.