Correlation Between Cineplex and Transcontinental

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

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

Diversification Opportunities for Cineplex and Transcontinental

0.9

Correlation Coefficient

Cineplex  Transcontinental

Almost no diversification

The 3 months correlation between Cineplex and Transcontinental is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cineplex and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and Cineplex 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 Cineplex are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Cineplex i.e., Cineplex and Transcontinental go up and down completely randomly.

Pair Corralation between Cineplex and Transcontinental

Assuming the 90 days trading horizon Cineplex is expected to generate 1.31 times more return on investment than Transcontinental. However, Cineplex is 1.31 times more volatile than Transcontinental. It trades about -0.05 of its potential returns per unit of risk. Transcontinental is currently generating about -0.13 per unit of risk. If you would invest  1,128  in Cineplex on April 23, 2025 and sell it today you would lose (18.00) from holding Cineplex or give up 1.6% of portfolio value over 90 days.

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

Cineplex  vs.  Transcontinental

Cineplex

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

Transcontinental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Transcontinental unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cineplex and Transcontinental

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

The idea behind Cineplex and Transcontinental 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.