Correlation Between Tree Island and Santeon

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

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

Diversification Opportunities for Tree Island and Santeon

0.44

Correlation Coefficient

Tree Island  Santeon

Very weak diversification

The 3 months correlation between Tree and Santeon is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Santeon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santeon Group and Tree Island 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 Tree Island Steel are associated (or correlated) with Santeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santeon Group has no effect on the direction of Tree Island i.e., Tree Island and Santeon go up and down completely randomly.

Pair Corralation between Tree Island and Santeon

Assuming the 90 days horizon Tree Island is expected to generate 4.49 times less return on investment than Santeon. But when comparing it to its historical volatility, Tree Island Steel is 7.4 times less risky than Santeon. It trades about 0.08 of its potential returns per unit of risk. Santeon Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Santeon Group on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Santeon Group or generate 0.0% return on investment over 90 days.

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

Tree Island Steel  vs.  Santeon Group

Tree Island Steel

Risk-Adjusted Performance

6 of 100

Modest

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 abnormal basic indicators, Tree Island may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Santeon Group

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santeon Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Santeon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree Island and Santeon

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

The idea behind Tree Island Steel and Santeon Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.