Correlation Between Boralex and Canfor

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

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

Diversification Opportunities for Boralex and Canfor

0.43

Correlation Coefficient

Boralex  Canfor

Very weak diversification

The 3 months correlation between Boralex and Canfor is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Boralex and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Boralex 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 Boralex 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 Boralex i.e., Boralex and Canfor go up and down completely randomly.

Pair Corralation between Boralex and Canfor

Assuming the 90 days trading horizon Boralex is expected to generate 0.73 times more return on investment than Canfor. However, Boralex is 1.36 times less risky than Canfor. It trades about -0.03 of its potential returns per unit of risk. Canfor is currently generating about -0.27 per unit of risk. If you would invest  2,937  in Boralex on October 7, 2024 and sell it today you would lose (20.00) from holding Boralex or give up 0.68% of portfolio value over 90 days.

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

Boralex  vs.  Canfor

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Boralex and Canfor

The main advantage of trading using opposite Boralex and Canfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boralex 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 Boralex 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.