Correlation Between Canoe EIT and Financial

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

By analyzing existing cross correlation between Canoe EIT Income and Financial 15 Split, you can compare the effects of market volatilities on Canoe EIT and Financial 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 Canoe EIT with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canoe EIT and Financial.

Diversification Opportunities for Canoe EIT and Financial

0.95

Correlation Coefficient

Canoe EIT  Financial

Almost no diversification

The 3 months correlation between Canoe and Financial is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Canoe EIT Income and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split and Canoe EIT 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 Canoe EIT Income are associated (or correlated) with Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Canoe EIT i.e., Canoe EIT and Financial go up and down completely randomly.

Pair Corralation between Canoe EIT and Financial

Assuming the 90 days trading horizon Canoe EIT is expected to generate 4.62 times less return on investment than Financial. But when comparing it to its historical volatility, Canoe EIT Income is 1.71 times less risky than Financial. It trades about 0.19 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Financial 15 Split on April 25, 2025 and sell it today you would earn a total of  219.00  from holding Financial 15 Split or generate 28.08% return on investment over 90 days.

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

Canoe EIT Income  vs.  Financial 15 Split

Canoe EIT Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canoe EIT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Financial 15 Split

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canoe EIT and Financial

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

The idea behind Canoe EIT Income and Financial 15 Split 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.