Correlation Between STELLA JONES and Canfor

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

By analyzing existing cross correlation between STELLA JONES INC and Canfor, you can compare the effects of market volatilities on STELLA JONES and Canfor 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 STELLA JONES with a short position of Canfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of STELLA JONES and Canfor.

Diversification Opportunities for STELLA JONES and Canfor

-0.15

Correlation Coefficient

STELLA JONES  Canfor

Good diversification

The 3 months correlation between STELLA and Canfor is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding STELLA JONES INC and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and STELLA JONES 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 STELLA JONES INC are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of STELLA JONES i.e., STELLA JONES and Canfor go up and down completely randomly.

Pair Corralation between STELLA JONES and Canfor

Assuming the 90 days horizon STELLA JONES INC is expected to generate 1.15 times more return on investment than Canfor. However, STELLA JONES is 1.15 times more volatile than Canfor. It trades about 0.03 of its potential returns per unit of risk. Canfor is currently generating about -0.37 per unit of risk. If you would invest  4,672  in STELLA JONES INC on September 24, 2024 and sell it today you would earn a total of  48.00  from holding STELLA JONES INC or generate 1.03% return on investment over 90 days.

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

STELLA JONES INC  vs.  Canfor

STELLA JONES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Canfor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canfor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canfor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STELLA JONES and Canfor

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

The idea behind STELLA JONES INC and Canfor 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.