Correlation Between Homasote and Canfor

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

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

Diversification Opportunities for Homasote and Canfor

-0.71

Correlation Coefficient

Homasote  Canfor

Pay attention - limited upside

The 3 months correlation between Homasote and Canfor is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Homasote Co and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Homasote 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 Homasote Co are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Homasote i.e., Homasote and Canfor go up and down completely randomly.

Pair Corralation between Homasote and Canfor

Given the investment horizon of 90 days Homasote Co is expected to generate 4.58 times more return on investment than Canfor. However, Homasote is 4.58 times more volatile than Canfor. It trades about 0.34 of its potential returns per unit of risk. Canfor is currently generating about -0.27 per unit of risk. If you would invest  293.00  in Homasote Co on October 8, 2024 and sell it today you would earn a total of  172.00  from holding Homasote Co or generate 58.7% return on investment over 90 days.

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

Homasote Co  vs.  Canfor

Homasote

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Homasote Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Homasote exhibited solid returns over the last few months and may actually be approaching a breakup point.

Canfor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canfor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 Homasote and Canfor

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

The idea behind Homasote Co and Canfor 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.