Correlation Between Conifex Timber and Supremex

Can any of the company-specific risk be diversified away by investing in both Conifex Timber and Supremex 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 Conifex Timber and Supremex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Conifex Timber and Supremex, you can compare the effects of market volatilities on Conifex Timber and Supremex 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 Conifex Timber with a short position of Supremex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conifex Timber and Supremex.

Diversification Opportunities for Conifex Timber and Supremex

0.46

Correlation Coefficient

Conifex Timber  Supremex

Very weak diversification

The 3 months correlation between Conifex and Supremex is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Conifex Timber and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex and Conifex Timber 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 Conifex Timber are associated (or correlated) with Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Conifex Timber i.e., Conifex Timber and Supremex go up and down completely randomly.

Pair Corralation between Conifex Timber and Supremex

Assuming the 90 days trading horizon Conifex Timber is expected to under-perform the Supremex. In addition to that, Conifex Timber is 2.98 times more volatile than Supremex. It trades about -0.03 of its total potential returns per unit of risk. Supremex is currently generating about -0.02 per unit of volatility. If you would invest  397.00  in Supremex on September 27, 2024 and sell it today you would lose (13.00) from holding Supremex or give up 3.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Conifex Timber  vs.  Supremex

Conifex Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conifex Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Supremex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supremex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Supremex is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Conifex Timber and Supremex

The main advantage of trading using opposite Conifex Timber and Supremex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conifex Timber position performs unexpectedly, Supremex 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 Supremex will offset losses from the drop in Supremex's long position.

The idea behind Conifex Timber and Supremex pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.