Correlation Between China Liberal and Dollarama

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

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

Diversification Opportunities for China Liberal and Dollarama

-0.07

Correlation Coefficient

China Liberal  Dollarama

Good diversification

The 3 months correlation between China and Dollarama is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and China Liberal 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 China Liberal Education are associated (or correlated) with Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of China Liberal i.e., China Liberal and Dollarama go up and down completely randomly.

Pair Corralation between China Liberal and Dollarama

Given the investment horizon of 90 days China Liberal Education is expected to under-perform the Dollarama. In addition to that, China Liberal is 3.38 times more volatile than Dollarama. It trades about -0.41 of its total potential returns per unit of risk. Dollarama is currently generating about -0.03 per unit of volatility. If you would invest  10,515  in Dollarama on August 18, 2024 and sell it today you would lose (65.00) from holding Dollarama or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

China Liberal Education  vs.  Dollarama

China Liberal Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Liberal Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, China Liberal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Dollarama

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dollarama is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Liberal and Dollarama

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

The idea behind China Liberal Education and Dollarama 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.