Correlation Between Canfor and Conifex Timber

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

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

Diversification Opportunities for Canfor and Conifex Timber

0.33

Correlation Coefficient

Canfor  Conifex Timber

Weak diversification

The 3 months correlation between Canfor and Conifex is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Canfor 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 Canfor are associated (or correlated) with Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Canfor i.e., Canfor and Conifex Timber go up and down completely randomly.

Pair Corralation between Canfor and Conifex Timber

Assuming the 90 days trading horizon Canfor is expected to generate 0.45 times more return on investment than Conifex Timber. However, Canfor is 2.21 times less risky than Conifex Timber. It trades about 0.13 of its potential returns per unit of risk. Conifex Timber is currently generating about 0.0 per unit of risk. If you would invest  1,436  in Canfor on September 5, 2024 and sell it today you would earn a total of  273.00  from holding Canfor or generate 19.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Canfor  vs.  Conifex Timber

Canfor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Canfor displayed solid returns over the last few months and may actually be approaching a breakup point.

Conifex Timber

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Conifex Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Conifex Timber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canfor and Conifex Timber

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

The idea behind Canfor and Conifex Timber 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.