Correlation Between Tree Island and Canfor
Can any of the company-specific risk be diversified away by investing in both Tree Island and Canfor 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 Tree Island and Canfor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tree Island Steel and Canfor, you can compare the effects of market volatilities on Tree Island and Canfor 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 Tree Island with a short position of Canfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Canfor.
Diversification Opportunities for Tree Island and Canfor
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tree and Canfor is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Tree Island 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 Tree Island Steel are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Tree Island i.e., Tree Island and Canfor go up and down completely randomly.
Pair Corralation between Tree Island and Canfor
Assuming the 90 days trading horizon Tree Island Steel is expected to generate 1.25 times more return on investment than Canfor. However, Tree Island is 1.25 times more volatile than Canfor. It trades about 0.04 of its potential returns per unit of risk. Canfor is currently generating about -0.11 per unit of risk. If you would invest 293.00 in Tree Island Steel on October 14, 2024 and sell it today you would earn a total of 11.00 from holding Tree Island Steel or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tree Island Steel vs. Canfor
Performance |
| Timeline |
| Tree Island Steel |
| Canfor |
Tree Island and Canfor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tree Island and Canfor
The main advantage of trading using opposite Tree Island and Canfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tree Island position performs unexpectedly, Canfor 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 Canfor will offset losses from the drop in Canfor's long position.| Tree Island vs. Supremex | Tree Island vs. Conifex Timber | Tree Island vs. Exco Technologies Limited | Tree Island vs. Taiga Building Products |
| Canfor vs. Capstone Mining Corp | Canfor vs. NeXGold Mining Corp | Canfor vs. HPQ Silicon Resources | Canfor vs. Costco Wholesale Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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