Correlation Between Canfor and National Storm

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

By analyzing existing cross correlation between Canfor and National Storm Recovery, you can compare the effects of market volatilities on Canfor and National Storm 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 National Storm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canfor and National Storm.

Diversification Opportunities for Canfor and National Storm

-0.02

Correlation Coefficient

Canfor  National Storm

Good diversification

The 3 months correlation between Canfor and National is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and National Storm Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storm Recovery 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 National Storm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storm Recovery has no effect on the direction of Canfor i.e., Canfor and National Storm go up and down completely randomly.

Pair Corralation between Canfor and National Storm

Assuming the 90 days horizon Canfor is expected to generate 98.72 times less return on investment than National Storm. But when comparing it to its historical volatility, Canfor is 5.6 times less risky than National Storm. It trades about 0.01 of its potential returns per unit of risk. National Storm Recovery is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.33  in National Storm Recovery on December 27, 2024 and sell it today you would earn a total of  1.27  from holding National Storm Recovery or generate 20.06% return on investment over 90 days.

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

Canfor  vs.  National Storm Recovery

Canfor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

National Storm Recovery

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Canfor and National Storm

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

The idea behind Canfor and National Storm Recovery 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.