Correlation Between Dave and Canlan Ice

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

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

Diversification Opportunities for Dave and Canlan Ice

0.17

Correlation Coefficient

Dave  Canlan Ice

Average diversification

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

Pair Corralation between Dave and Canlan Ice

Given the investment horizon of 90 days Dave Inc is expected to generate 75.17 times more return on investment than Canlan Ice. However, Dave is 75.17 times more volatile than Canlan Ice Sports. It trades about 0.01 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.09 per unit of risk. If you would invest  7,328  in Dave Inc on January 20, 2024 and sell it today you would lose (3,917) from holding Dave Inc or give up 53.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	58.74%
Values	Daily Returns

Dave Inc  vs.  Canlan Ice Sports

Dave Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Dave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Canlan Ice Sports

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dave and Canlan Ice

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

The idea behind Dave Inc and Canlan Ice Sports 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 Global Correlations module to find global opportunities by holding instruments from different markets.