Correlation Between Cascades and Canfor

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

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

Diversification Opportunities for Cascades and Canfor

0.86

Correlation Coefficient

Cascades  Canfor

Very poor diversification

The 3 months correlation between Cascades and Canfor is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cascades and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Cascades 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 Cascades 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 Cascades i.e., Cascades and Canfor go up and down completely randomly.

Pair Corralation between Cascades and Canfor

Assuming the 90 days trading horizon Cascades is expected to generate 0.86 times more return on investment than Canfor. However, Cascades is 1.16 times less risky than Canfor. It trades about 0.06 of its potential returns per unit of risk. Canfor is currently generating about -0.02 per unit of risk. If you would invest  738.00  in Cascades on September 4, 2024 and sell it today you would earn a total of  518.00  from holding Cascades or generate 70.19% return on investment over 90 days.

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

Cascades  vs.  Canfor

Cascades

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cascades are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cascades displayed solid returns over the last few months and may actually be approaching a breakup point.

Canfor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canfor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cascades and Canfor

The main advantage of trading using opposite Cascades and Canfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cascades 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 Cascades 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.