Correlation Between Algoma Central and Acadian Timber
Can any of the company-specific risk be diversified away by investing in both Algoma Central and Acadian Timber 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 Algoma Central and Acadian Timber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Central and Acadian Timber Corp, you can compare the effects of market volatilities on Algoma Central and Acadian Timber 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 Algoma Central with a short position of Acadian Timber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Central and Acadian Timber.
Diversification Opportunities for Algoma Central and Acadian Timber
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Algoma and Acadian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Central and Acadian Timber Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadian Timber Corp and Algoma Central 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 Algoma Central are associated (or correlated) with Acadian Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadian Timber Corp has no effect on the direction of Algoma Central i.e., Algoma Central and Acadian Timber go up and down completely randomly.
Pair Corralation between Algoma Central and Acadian Timber
Assuming the 90 days trading horizon Algoma Central is expected to generate 0.87 times more return on investment than Acadian Timber. However, Algoma Central is 1.15 times less risky than Acadian Timber. It trades about -0.01 of its potential returns per unit of risk. Acadian Timber Corp is currently generating about -0.16 per unit of risk. If you would invest 1,518 in Algoma Central on August 25, 2024 and sell it today you would lose (5.00) from holding Algoma Central or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Central vs. Acadian Timber Corp
Performance |
| Timeline |
| Algoma Central |
| Acadian Timber Corp |
Algoma Central and Acadian Timber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Central and Acadian Timber
The main advantage of trading using opposite Algoma Central and Acadian Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Central position performs unexpectedly, Acadian Timber 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 Acadian Timber will offset losses from the drop in Acadian Timber's long position.| Algoma Central vs. Goodfellow | Algoma Central vs. Leons Furniture Limited | Algoma Central vs. High Liner Foods | Algoma Central vs. Exco Technologies Limited |
| Acadian Timber vs. Bip Investment Corp | Acadian Timber vs. High Liner Foods | Acadian Timber vs. Ocumetics Technology Corp | Acadian Timber vs. Partners Value Investments |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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