Correlation Between Canfor and Transcontinental
Can any of the company-specific risk be diversified away by investing in both Canfor and Transcontinental 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 Canfor and Transcontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canfor and Transcontinental, you can compare the effects of market volatilities on Canfor and Transcontinental 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 Canfor with a short position of Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canfor and Transcontinental.
Diversification Opportunities for Canfor and Transcontinental
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canfor and Transcontinental is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and Canfor 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 Canfor are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Canfor i.e., Canfor and Transcontinental go up and down completely randomly.
Pair Corralation between Canfor and Transcontinental
Assuming the 90 days trading horizon Canfor is expected to generate 2.35 times more return on investment than Transcontinental. However, Canfor is 2.35 times more volatile than Transcontinental. It trades about 0.16 of its potential returns per unit of risk. Transcontinental is currently generating about -0.14 per unit of risk. If you would invest 1,674 in Canfor on August 31, 2024 and sell it today you would earn a total of 119.00 from holding Canfor or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canfor vs. Transcontinental
Performance |
| Timeline |
| Canfor |
| Transcontinental |
Canfor and Transcontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canfor and Transcontinental
The main advantage of trading using opposite Canfor and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canfor position performs unexpectedly, Transcontinental 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 Transcontinental will offset losses from the drop in Transcontinental's long position.| Canfor vs. HPQ Silicon Resources | Canfor vs. High Liner Foods | Canfor vs. SPoT Coffee | Canfor vs. Maple Leaf Foods |
| Transcontinental vs. Cogeco Communications | Transcontinental vs. Quebecor | Transcontinental vs. CCL Industries | Transcontinental vs. Finning International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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