Correlation Between Tree Island and Magnum Goldcorp
Can any of the company-specific risk be diversified away by investing in both Tree Island and Magnum Goldcorp 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 Magnum Goldcorp 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 Magnum Goldcorp, you can compare the effects of market volatilities on Tree Island and Magnum Goldcorp 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 Magnum Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Magnum Goldcorp.
Diversification Opportunities for Tree Island and Magnum Goldcorp
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tree and Magnum is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Magnum Goldcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Goldcorp 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 Magnum Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Goldcorp has no effect on the direction of Tree Island i.e., Tree Island and Magnum Goldcorp go up and down completely randomly.
Pair Corralation between Tree Island and Magnum Goldcorp
Assuming the 90 days trading horizon Tree Island is expected to generate 275.76 times less return on investment than Magnum Goldcorp. But when comparing it to its historical volatility, Tree Island Steel is 9.6 times less risky than Magnum Goldcorp. It trades about 0.0 of its potential returns per unit of risk. Magnum Goldcorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Magnum Goldcorp on August 26, 2024 and sell it today you would lose (3.00) from holding Magnum Goldcorp or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
Tree Island Steel vs. Magnum Goldcorp
Performance |
| Timeline |
| Tree Island Steel |
| Magnum Goldcorp |
Tree Island and Magnum Goldcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tree Island and Magnum Goldcorp
The main advantage of trading using opposite Tree Island and Magnum Goldcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tree Island position performs unexpectedly, Magnum Goldcorp 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 Magnum Goldcorp will offset losses from the drop in Magnum Goldcorp's long position.| Tree Island vs. Supremex | Tree Island vs. Conifex Timber | Tree Island vs. Exco Technologies Limited | Tree Island vs. Taiga Building 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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