Correlation Between Financial and Acadian Timber
Can any of the company-specific risk be diversified away by investing in both Financial 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 Financial and Acadian Timber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Acadian Timber Corp, you can compare the effects of market volatilities on Financial 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 Financial with a short position of Acadian Timber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Acadian Timber.
Diversification Opportunities for Financial and Acadian Timber
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Financial and Acadian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 Financial 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 Financial 15 Split 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 Financial i.e., Financial and Acadian Timber go up and down completely randomly.
Pair Corralation between Financial and Acadian Timber
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.33 times more return on investment than Acadian Timber. However, Financial 15 Split is 3.01 times less risky than Acadian Timber. It trades about 0.36 of its potential returns per unit of risk. Acadian Timber Corp is currently generating about -0.19 per unit of risk. If you would invest 1,034 in Financial 15 Split on August 29, 2024 and sell it today you would earn a total of 31.00 from holding Financial 15 Split or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Acadian Timber Corp
Performance |
| Timeline |
| Financial 15 Split |
| Acadian Timber Corp |
Financial and Acadian Timber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Acadian Timber
The main advantage of trading using opposite Financial and Acadian Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
| Acadian Timber vs. Altair Resources | Acadian Timber vs. Diamond Estates Wines | Acadian Timber vs. Partners Value Investments | Acadian Timber vs. Highwood Asset Management |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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