Correlation Between Exco Technologies and Tree Island
Can any of the company-specific risk be diversified away by investing in both Exco Technologies and Tree Island 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 Exco Technologies and Tree Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exco Technologies Limited and Tree Island Steel, you can compare the effects of market volatilities on Exco Technologies and Tree Island 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 Exco Technologies with a short position of Tree Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exco Technologies and Tree Island.
Diversification Opportunities for Exco Technologies and Tree Island
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exco and Tree is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Exco Technologies Limited and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel and Exco Technologies 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 Exco Technologies Limited are associated (or correlated) with Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of Exco Technologies i.e., Exco Technologies and Tree Island go up and down completely randomly.
Pair Corralation between Exco Technologies and Tree Island
Assuming the 90 days trading horizon Exco Technologies Limited is expected to generate 0.66 times more return on investment than Tree Island. However, Exco Technologies Limited is 1.51 times less risky than Tree Island. It trades about 0.06 of its potential returns per unit of risk. Tree Island Steel is currently generating about -0.02 per unit of risk. If you would invest 738.00 in Exco Technologies Limited on August 28, 2024 and sell it today you would earn a total of 123.00 from holding Exco Technologies Limited or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Exco Technologies Limited vs. Tree Island Steel
Performance |
| Timeline |
| Exco Technologies |
| Tree Island Steel |
Exco Technologies and Tree Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exco Technologies and Tree Island
The main advantage of trading using opposite Exco Technologies and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exco Technologies position performs unexpectedly, Tree Island 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 Tree Island will offset losses from the drop in Tree Island's long position.| Exco Technologies vs. Transcontinental | Exco Technologies vs. Methanex | Exco Technologies vs. Stella Jones | Exco Technologies vs. High Liner Foods |
| Tree Island vs. First Majestic Silver | Tree Island vs. Ivanhoe Energy | Tree Island vs. Orezone Gold 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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