Correlation Between Laurentian Bank and Isabella Bank

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

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

Diversification Opportunities for Laurentian Bank and Isabella Bank

0.57

Correlation Coefficient

Laurentian Bank  Isabella Bank

Very weak diversification

The 3 months correlation between Laurentian and Isabella is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank of and Isabella Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isabella Bank and Laurentian Bank 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 Laurentian Bank of are associated (or correlated) with Isabella Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isabella Bank has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and Isabella Bank go up and down completely randomly.

Pair Corralation between Laurentian Bank and Isabella Bank

Assuming the 90 days horizon Laurentian Bank is expected to generate 1.72 times less return on investment than Isabella Bank. But when comparing it to its historical volatility, Laurentian Bank of is 1.21 times less risky than Isabella Bank. It trades about 0.14 of its potential returns per unit of risk. Isabella Bank is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,176  in Isabella Bank on September 10, 2025 and sell it today you would earn a total of  1,444  from holding Isabella Bank or generate 45.47% return on investment over 90 days.

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

Laurentian Bank of  vs.  Isabella Bank

Laurentian Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Laurentian Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Isabella Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Isabella Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Isabella Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laurentian Bank and Isabella Bank

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

The idea behind Laurentian Bank of and Isabella Bank 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.