Correlation Between Maple Leaf and ACT Energy

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

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

Diversification Opportunities for Maple Leaf and ACT Energy

-0.6

Correlation Coefficient

Maple Leaf  ACT Energy

Excellent diversification

The 3 months correlation between Maple and ACT is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and ACT Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACT Energy Technologies and Maple Leaf 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 Maple Leaf Foods are associated (or correlated) with ACT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACT Energy Technologies has no effect on the direction of Maple Leaf i.e., Maple Leaf and ACT Energy go up and down completely randomly.

Pair Corralation between Maple Leaf and ACT Energy

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 0.85 times more return on investment than ACT Energy. However, Maple Leaf Foods is 1.18 times less risky than ACT Energy. It trades about 0.31 of its potential returns per unit of risk. ACT Energy Technologies is currently generating about -0.07 per unit of risk. If you would invest  2,587  in Maple Leaf Foods on May 15, 2025 and sell it today you would earn a total of  798.00  from holding Maple Leaf Foods or generate 30.85% return on investment over 90 days.

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

Maple Leaf Foods  vs.  ACT Energy Technologies

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 24 (%) 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.

ACT Energy Technologies

Risk-Adjusted Performance

Weakest

Over the last 90 days ACT Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Maple Leaf and ACT Energy

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

The idea behind Maple Leaf Foods and ACT Energy Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.