Correlation Between Santeon and Tree Island

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

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

Diversification Opportunities for Santeon and Tree Island

0.51

Correlation Coefficient

Santeon  Tree Island

Very weak diversification

The 3 months correlation between Santeon and Tree is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Santeon Group and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel and Santeon 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 Santeon Group are associated (or correlated) with Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of Santeon i.e., Santeon and Tree Island go up and down completely randomly.

Pair Corralation between Santeon and Tree Island

Given the investment horizon of 90 days Santeon Group is expected to generate 8.9 times more return on investment than Tree Island. However, Santeon is 8.9 times more volatile than Tree Island Steel. It trades about 0.08 of its potential returns per unit of risk. Tree Island Steel is currently generating about -0.01 per unit of risk. If you would invest  2.00  in Santeon Group on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Santeon Group or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.87%
Values	Daily Returns

Santeon Group  vs.  Tree Island Steel

Santeon Group

Risk-Adjusted Performance

8 of 100

OK

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

Tree Island Steel

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tree Island may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Santeon and Tree Island

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

The idea behind Santeon Group and Tree Island Steel 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.