Correlation Between DIRTT Environmental and Canadian Tire

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

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

Diversification Opportunities for DIRTT Environmental and Canadian Tire

-0.45

Correlation Coefficient

DIRTT Environmental  Canadian Tire

Very good diversification

The 3 months correlation between DIRTT and Canadian is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding DIRTT Environmental Solutions and Canadian Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Tire and DIRTT Environmental 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 DIRTT Environmental Solutions are associated (or correlated) with Canadian Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Tire has no effect on the direction of DIRTT Environmental i.e., DIRTT Environmental and Canadian Tire go up and down completely randomly.

Pair Corralation between DIRTT Environmental and Canadian Tire

Assuming the 90 days trading horizon DIRTT Environmental Solutions is expected to generate 4.2 times more return on investment than Canadian Tire. However, DIRTT Environmental is 4.2 times more volatile than Canadian Tire. It trades about 0.04 of its potential returns per unit of risk. Canadian Tire is currently generating about 0.02 per unit of risk. If you would invest  75.00  in DIRTT Environmental Solutions on September 28, 2024 and sell it today you would earn a total of  20.00  from holding DIRTT Environmental Solutions or generate 26.67% return on investment over 90 days.

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

DIRTT Environmental Solutions  vs.  Canadian Tire

DIRTT Environmental

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIRTT Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Canadian Tire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Tire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Tire is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DIRTT Environmental and Canadian Tire

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

The idea behind DIRTT Environmental Solutions and Canadian Tire 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.