Correlation Between George Weston and FirstService Corp

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

Diversification Opportunities for George Weston and FirstService Corp

0.29

Correlation Coefficient

George Weston  FirstService Corp

Modest diversification

The 3 months correlation between George and FirstService is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding George Weston Limited and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp 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 FirstService Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstService Corp has no effect on the direction of George Weston i.e., George Weston and FirstService Corp go up and down completely randomly.

Pair Corralation between George Weston and FirstService Corp

Assuming the 90 days horizon George Weston is expected to generate 2.85 times less return on investment than FirstService Corp. In addition to that, George Weston is 1.08 times more volatile than FirstService Corp. It trades about 0.05 of its total potential returns per unit of risk. FirstService Corp is currently generating about 0.16 per unit of volatility. If you would invest  24,489  in FirstService Corp on September 12, 2024 and sell it today you would earn a total of  2,511  from holding FirstService Corp or generate 10.25% return on investment over 90 days.

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

George Weston Limited  vs.  FirstService Corp

George Weston Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

FirstService Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with George Weston and FirstService Corp

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

The idea behind George Weston Limited and FirstService Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.