Correlation Between AutoCanada and K Bro

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

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

Diversification Opportunities for AutoCanada and K Bro

0.17

Correlation Coefficient

AutoCanada  K Bro

Average diversification

The 3 months correlation between AutoCanada and KBRLF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AutoCanada and K Bro Linen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Bro Linen and AutoCanada 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 AutoCanada are associated (or correlated) with K Bro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Bro Linen has no effect on the direction of AutoCanada i.e., AutoCanada and K Bro go up and down completely randomly.

Pair Corralation between AutoCanada and K Bro

Assuming the 90 days horizon AutoCanada is expected to generate 4.87 times more return on investment than K Bro. However, AutoCanada is 4.87 times more volatile than K Bro Linen. It trades about 0.29 of its potential returns per unit of risk. K Bro Linen is currently generating about -0.02 per unit of risk. If you would invest  1,160  in AutoCanada on April 30, 2025 and sell it today you would earn a total of  881.00  from holding AutoCanada or generate 75.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	62.3%
Values	Daily Returns

AutoCanada  vs.  K Bro Linen

AutoCanada

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AutoCanada are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, AutoCanada reported solid returns over the last few months and may actually be approaching a breakup point.

K Bro Linen

Risk-Adjusted Performance

Very Weak

Over the last 90 days K Bro Linen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, K Bro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AutoCanada and K Bro

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

The idea behind AutoCanada and K Bro Linen 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.