Correlation Between Canlan Ice and Opus One

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

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

Diversification Opportunities for Canlan Ice and Opus One

-0.14

Correlation Coefficient

Canlan Ice  Opus One

Good diversification

The 3 months correlation between Canlan and Opus is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Opus One Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opus One Resources and Canlan Ice 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 Canlan Ice Sports are associated (or correlated) with Opus One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opus One Resources has no effect on the direction of Canlan Ice i.e., Canlan Ice and Opus One go up and down completely randomly.

Pair Corralation between Canlan Ice and Opus One

Assuming the 90 days trading horizon Canlan Ice is expected to generate 43.27 times less return on investment than Opus One. But when comparing it to its historical volatility, Canlan Ice Sports is 10.3 times less risky than Opus One. It trades about 0.02 of its potential returns per unit of risk. Opus One Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Opus One Resources on September 24, 2024 and sell it today you would earn a total of  2.50  from holding Opus One Resources or generate 125.0% return on investment over 90 days.

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

Canlan Ice Sports  vs.  Opus One Resources

Canlan Ice Sports

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 4 (%) 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.

Opus One Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opus One Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Opus One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canlan Ice and Opus One

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

The idea behind Canlan Ice Sports and Opus One Resources 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.