Correlation Between Premium Income and Maple Leaf

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

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

Diversification Opportunities for Premium Income and Maple Leaf

0.95

Correlation Coefficient

Premium Income  Maple Leaf

Almost no diversification

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

Pair Corralation between Premium Income and Maple Leaf

Assuming the 90 days trading horizon Premium Income is expected to generate 0.98 times more return on investment than Maple Leaf. However, Premium Income is 1.03 times less risky than Maple Leaf. It trades about 0.39 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.25 per unit of risk. If you would invest  473.00  in Premium Income on April 6, 2025 and sell it today you would earn a total of  180.00  from holding Premium Income or generate 38.05% return on investment over 90 days.

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

Premium Income  vs.  Maple Leaf Foods

Premium Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Income are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Premium Income unveiled solid returns over the last few months and may actually be approaching a breakup point.

Maple Leaf Foods

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Maple Leaf displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premium Income and Maple Leaf

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

The idea behind Premium Income and Maple Leaf Foods 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.