Correlation Between Excellon Resources and Tree Island

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

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

Diversification Opportunities for Excellon Resources and Tree Island

-0.54

Correlation Coefficient

Excellon Resources  Tree Island

Excellent diversification

The 3 months correlation between Excellon and Tree is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Excellon Resources 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 Excellon Resources 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 Excellon Resources 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 Excellon Resources i.e., Excellon Resources and Tree Island go up and down completely randomly.

Pair Corralation between Excellon Resources and Tree Island

Assuming the 90 days trading horizon Excellon Resources is expected to generate 2.09 times more return on investment than Tree Island. However, Excellon Resources is 2.09 times more volatile than Tree Island Steel. It trades about 0.03 of its potential returns per unit of risk. Tree Island Steel is currently generating about 0.02 per unit of risk. If you would invest  10.00  in Excellon Resources on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Excellon Resources or generate 0.0% return on investment over 90 days.

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

Excellon Resources  vs.  Tree Island Steel

Excellon Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Excellon Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Excellon Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tree Island Steel

Risk-Adjusted Performance

1 of 100

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 Excellon Resources and Tree Island

The main advantage of trading using opposite Excellon Resources and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Excellon Resources 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 Excellon Resources 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.