Correlation Between Canfor Pulp and Conifex Timber

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

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

Diversification Opportunities for Canfor Pulp and Conifex Timber

0.19

Correlation Coefficient

Canfor Pulp  Conifex Timber

Average diversification

The 3 months correlation between Canfor and Conifex is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Canfor Pulp Products and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Canfor Pulp 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 Canfor Pulp 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 Canfor Pulp i.e., Canfor Pulp and Conifex Timber go up and down completely randomly.

Pair Corralation between Canfor Pulp and Conifex Timber

Assuming the 90 days trading horizon Canfor Pulp Products is expected to under-perform the Conifex Timber. But the stock apears to be less risky and, when comparing its historical volatility, Canfor Pulp Products is 1.52 times less risky than Conifex Timber. The stock trades about -0.03 of its potential returns per unit of risk. The Conifex Timber is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Conifex Timber on September 4, 2024 and sell it today you would lose (1.00) from holding Conifex Timber or give up 2.56% of portfolio value over 90 days.

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

Canfor Pulp Products  vs.  Conifex Timber

Canfor Pulp Products

Risk-Adjusted Performance

0 of 100

Very Weak

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

Conifex Timber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Conifex Timber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Conifex Timber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canfor Pulp and Conifex Timber

The main advantage of trading using opposite Canfor Pulp and Conifex Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canfor Pulp 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.

The idea behind Canfor Pulp Products and Conifex Timber 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.