Correlation Between E L and Canadian Tire

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

By analyzing existing cross correlation between E L Financial 3 and Canadian Tire, you can compare the effects of market volatilities on E L and Canadian Tire 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 E L with a short position of Canadian Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Canadian Tire.

Diversification Opportunities for E L and Canadian Tire

0.95

Correlation Coefficient

E L  Canadian Tire

Almost no diversification

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

Pair Corralation between E L and Canadian Tire

Assuming the 90 days trading horizon E L is expected to generate 3.81 times less return on investment than Canadian Tire. But when comparing it to its historical volatility, E L Financial 3 is 2.34 times less risky than Canadian Tire. It trades about 0.25 of its potential returns per unit of risk. Canadian Tire is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  15,044  in Canadian Tire on April 29, 2025 and sell it today you would earn a total of  3,858  from holding Canadian Tire or generate 25.64% return on investment over 90 days.

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

E L Financial 3  vs.  Canadian Tire

E L Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial 3 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Canadian Tire

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Tire are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Canadian Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E L and Canadian Tire

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

The idea behind E L Financial 3 and Canadian Tire 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..