Correlation Between George Weston and Covalon Technologies

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

By analyzing existing cross correlation between George Weston Limited and Covalon Technologies, you can compare the effects of market volatilities on George Weston and Covalon Technologies 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 George Weston with a short position of Covalon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of George Weston and Covalon Technologies.

Diversification Opportunities for George Weston and Covalon Technologies

0.15

Correlation Coefficient

George Weston  Covalon Technologies

Average diversification

The 3 months correlation between George and Covalon is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding George Weston Limited and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and George Weston 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 George Weston Limited are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of George Weston i.e., George Weston and Covalon Technologies go up and down completely randomly.

Pair Corralation between George Weston and Covalon Technologies

Assuming the 90 days horizon George Weston Limited is expected to generate 0.36 times more return on investment than Covalon Technologies. However, George Weston Limited is 2.74 times less risky than Covalon Technologies. It trades about 0.07 of its potential returns per unit of risk. Covalon Technologies is currently generating about -0.22 per unit of risk. If you would invest  22,427  in George Weston Limited on September 30, 2024 and sell it today you would earn a total of  267.00  from holding George Weston Limited or generate 1.19% return on investment over 90 days.

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

George Weston Limited  vs.  Covalon Technologies

George Weston Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days George Weston Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Covalon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Covalon Technologies is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with George Weston and Covalon Technologies

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

The idea behind George Weston Limited and Covalon Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.