Correlation Between Doman Building and Canlan Ice

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

By analyzing existing cross correlation between Doman Building Materials and Canlan Ice Sports, you can compare the effects of market volatilities on Doman Building and Canlan Ice 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 Doman Building with a short position of Canlan Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doman Building and Canlan Ice.

Diversification Opportunities for Doman Building and Canlan Ice

0.62

Correlation Coefficient

Doman Building  Canlan Ice

Poor diversification

The 3 months correlation between Doman and Canlan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and Doman Building 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 Doman Building Materials are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Doman Building i.e., Doman Building and Canlan Ice go up and down completely randomly.

Pair Corralation between Doman Building and Canlan Ice

Assuming the 90 days trading horizon Doman Building Materials is expected to generate 1.17 times more return on investment than Canlan Ice. However, Doman Building is 1.17 times more volatile than Canlan Ice Sports. It trades about 0.22 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.04 per unit of risk. If you would invest  724.00  in Doman Building Materials on September 13, 2024 and sell it today you would earn a total of  221.00  from holding Doman Building Materials or generate 30.52% return on investment over 90 days.

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

Doman Building Materials  vs.  Canlan Ice Sports

Doman Building Materials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Doman Building Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Doman Building displayed solid returns over the last few months and may actually be approaching a breakup point.

Canlan Ice Sports

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Doman Building and Canlan Ice

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

The idea behind Doman Building Materials and Canlan Ice Sports 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.