Correlation Between Canfor Pulp and Nine Dragons

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

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

Diversification Opportunities for Canfor Pulp and Nine Dragons

0.64

Correlation Coefficient

Canfor Pulp  Nine Dragons

Poor diversification

The 3 months correlation between Canfor and Nine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Canfor Pulp Products and Nine Dragons Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Dragons Paper and Canfor Pulp 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 Pulp Products are associated (or correlated) with Nine Dragons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Dragons Paper has no effect on the direction of Canfor Pulp i.e., Canfor Pulp and Nine Dragons go up and down completely randomly.

Pair Corralation between Canfor Pulp and Nine Dragons

Assuming the 90 days horizon Canfor Pulp Products is expected to generate 1.33 times more return on investment than Nine Dragons. However, Canfor Pulp is 1.33 times more volatile than Nine Dragons Paper. It trades about -0.05 of its potential returns per unit of risk. Nine Dragons Paper is currently generating about -0.11 per unit of risk. If you would invest  70.00  in Canfor Pulp Products on October 26, 2024 and sell it today you would lose (12.00) from holding Canfor Pulp Products or give up 17.14% of portfolio value over 90 days.

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

Canfor Pulp Products  vs.  Nine Dragons Paper

Canfor Pulp Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canfor Pulp Products 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nine Dragons Paper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nine Dragons Paper 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Canfor Pulp and Nine Dragons

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

The idea behind Canfor Pulp Products and Nine Dragons Paper 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.