Correlation Between Caribbean Utilities and Canfor

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

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

Diversification Opportunities for Caribbean Utilities and Canfor

-0.38

Correlation Coefficient

Caribbean Utilities  Canfor

Very good diversification

The 3 months correlation between Caribbean and Canfor is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities i.e., Caribbean Utilities and Canfor go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Canfor

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 0.97 times more return on investment than Canfor. However, Caribbean Utilities is 1.03 times less risky than Canfor. It trades about 0.02 of its potential returns per unit of risk. Canfor is currently generating about -0.01 per unit of risk. If you would invest  1,342  in Caribbean Utilities on September 14, 2024 and sell it today you would earn a total of  82.00  from holding Caribbean Utilities or generate 6.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Caribbean Utilities  vs.  Canfor

Caribbean Utilities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caribbean Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of very healthy basic indicators, Canfor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caribbean Utilities and Canfor

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

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.