Correlation Between Canfor and National Storm
Can any of the company-specific risk be diversified away by investing in both Canfor and National Storm 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 National Storm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canfor and National Storm Recovery, you can compare the effects of market volatilities on Canfor and National Storm 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 National Storm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canfor and National Storm.
Diversification Opportunities for Canfor and National Storm
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canfor and National is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and National Storm Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storm Recovery 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 National Storm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storm Recovery has no effect on the direction of Canfor i.e., Canfor and National Storm go up and down completely randomly.
Pair Corralation between Canfor and National Storm
Assuming the 90 days horizon Canfor is expected to under-perform the National Storm. But the pink sheet apears to be less risky and, when comparing its historical volatility, Canfor is 7.17 times less risky than National Storm. The pink sheet trades about -0.03 of its potential returns per unit of risk. The National Storm Recovery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 199.00 in National Storm Recovery on November 27, 2024 and sell it today you would lose (193.00) from holding National Storm Recovery or give up 96.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canfor vs. National Storm Recovery
Performance |
| Timeline |
| Canfor |
| National Storm Recovery |
Canfor and National Storm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canfor and National Storm
The main advantage of trading using opposite Canfor and National Storm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canfor position performs unexpectedly, National Storm 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 National Storm will offset losses from the drop in National Storm's long position.| Canfor vs. Conifex Timber | Canfor vs. GreenFirst Forest Products | Canfor vs. West Fraser Timber | Canfor vs. Ufp Industries |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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