Correlation Between Conifex Timber and Canfor

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

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

Diversification Opportunities for Conifex Timber and Canfor

0.45

Correlation Coefficient

Conifex Timber  Canfor

Very weak diversification

The 3 months correlation between Conifex and Canfor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Conifex Timber and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor 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 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 Conifex Timber i.e., Conifex Timber and Canfor go up and down completely randomly.

Pair Corralation between Conifex Timber and Canfor

Assuming the 90 days horizon Conifex Timber is expected to generate 0.7 times more return on investment than Canfor. However, Conifex Timber is 1.43 times less risky than Canfor. It trades about 0.17 of its potential returns per unit of risk. Canfor is currently generating about 0.03 per unit of risk. If you would invest  28.00  in Conifex Timber on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Conifex Timber or generate 17.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Conifex Timber  vs.  Canfor

Conifex Timber

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Conifex Timber are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Conifex Timber reported solid returns over the last few months and may actually be approaching a breakup point.

Canfor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canfor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Conifex Timber and Canfor

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

The idea behind Conifex Timber and Canfor 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.