Correlation Between Leons Furniture and ACT Energy
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and ACT Energy 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 Leons Furniture and ACT Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and ACT Energy Technologies, you can compare the effects of market volatilities on Leons Furniture and ACT Energy 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 Leons Furniture with a short position of ACT Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and ACT Energy.
Diversification Opportunities for Leons Furniture and ACT Energy
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Leons and ACT is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and ACT Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACT Energy Technologies and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with ACT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACT Energy Technologies has no effect on the direction of Leons Furniture i.e., Leons Furniture and ACT Energy go up and down completely randomly.
Pair Corralation between Leons Furniture and ACT Energy
Assuming the 90 days trading horizon Leons Furniture Limited is expected to generate 1.19 times more return on investment than ACT Energy. However, Leons Furniture is 1.19 times more volatile than ACT Energy Technologies. It trades about 0.18 of its potential returns per unit of risk. ACT Energy Technologies is currently generating about -0.07 per unit of risk. If you would invest 2,265 in Leons Furniture Limited on April 21, 2025 and sell it today you would earn a total of 460.00 from holding Leons Furniture Limited or generate 20.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Leons Furniture Limited vs. ACT Energy Technologies
Performance |
Timeline |
Leons Furniture |
ACT Energy Technologies |
Leons Furniture and ACT Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Leons Furniture and ACT Energy
The main advantage of trading using opposite Leons Furniture and ACT Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, ACT Energy 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 ACT Energy will offset losses from the drop in ACT Energy's long position.Leons Furniture vs. BMTC Group | Leons Furniture vs. Pet Valu Holdings | Leons Furniture vs. Canadian Tire | Leons Furniture vs. High Liner Foods |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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