Correlation Between Taiga Building and Conifex Timber
Can any of the company-specific risk be diversified away by investing in both Taiga Building and Conifex 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 Taiga Building and Conifex Timber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiga Building Products and Conifex Timber, you can compare the effects of market volatilities on Taiga Building and Conifex 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 Taiga Building with a short position of Conifex Timber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiga Building and Conifex Timber.
Diversification Opportunities for Taiga Building and Conifex Timber
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Taiga and Conifex is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Taiga Building Products and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Taiga Building 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 Taiga Building Products are associated (or correlated) with Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Taiga Building i.e., Taiga Building and Conifex Timber go up and down completely randomly.
Pair Corralation between Taiga Building and Conifex Timber
Assuming the 90 days trading horizon Taiga Building Products is expected to generate 0.54 times more return on investment than Conifex Timber. However, Taiga Building Products is 1.85 times less risky than Conifex Timber. It trades about 0.04 of its potential returns per unit of risk. Conifex Timber is currently generating about -0.04 per unit of risk. If you would invest 269.00 in Taiga Building Products on August 28, 2024 and sell it today you would earn a total of 110.00 from holding Taiga Building Products or generate 40.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiga Building Products vs. Conifex Timber
Performance |
| Timeline |
| Taiga Building Products |
| Conifex Timber |
Taiga Building and Conifex Timber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiga Building and Conifex Timber
The main advantage of trading using opposite Taiga Building and Conifex Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiga Building position performs unexpectedly, Conifex 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 Conifex Timber will offset losses from the drop in Conifex Timber's long position.| Taiga Building vs. Goodfellow | Taiga Building vs. Conifex Timber | Taiga Building vs. Supremex | Taiga Building vs. Western Forest Products |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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