Correlation Between Dexterra and Tree Island

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

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

Diversification Opportunities for Dexterra and Tree Island

0.2

Correlation Coefficient

Dexterra  Tree Island

Modest diversification

The 3 months correlation between Dexterra and Tree is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dexterra Group 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 Dexterra 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 Dexterra Group 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 Dexterra i.e., Dexterra and Tree Island go up and down completely randomly.

Pair Corralation between Dexterra and Tree Island

Assuming the 90 days trading horizon Dexterra Group is expected to generate 0.67 times more return on investment than Tree Island. However, Dexterra Group is 1.49 times less risky than Tree Island. It trades about 0.02 of its potential returns per unit of risk. Tree Island Steel is currently generating about -0.11 per unit of risk. If you would invest  775.00  in Dexterra Group on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Dexterra Group or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Dexterra Group  vs.  Tree Island Steel

Dexterra Group

Risk-Adjusted Performance

Weak

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

Tree Island Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tree Island Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential 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 Dexterra and Tree Island

The main advantage of trading using opposite Dexterra and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dexterra 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 Dexterra Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..