Correlation Between Chemtrade Logistics and Tree Island

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

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

Diversification Opportunities for Chemtrade Logistics and Tree Island

0.14

Correlation Coefficient

Chemtrade Logistics  Tree Island

Average diversification

The 3 months correlation between Chemtrade and Tree is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel and Chemtrade Logistics 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 Chemtrade Logistics Income are associated (or correlated) with Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of Chemtrade Logistics i.e., Chemtrade Logistics and Tree Island go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and Tree Island

Assuming the 90 days trading horizon Chemtrade Logistics Income is expected to under-perform the Tree Island. But the stock apears to be less risky and, when comparing its historical volatility, Chemtrade Logistics Income is 1.56 times less risky than Tree Island. The stock trades about -0.14 of its potential returns per unit of risk. The Tree Island Steel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  293.00  in Tree Island Steel on November 20, 2024 and sell it today you would earn a total of  2.00  from holding Tree Island Steel or generate 0.68% return on investment over 90 days.

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

Chemtrade Logistics Income  vs.  Tree Island Steel

Chemtrade Logistics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tree Island Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Tree Island is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Chemtrade Logistics and Tree Island

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

The idea behind Chemtrade Logistics Income and Tree Island Steel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.