Correlation Between Itafos Corp and Conifex Timber

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

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

Diversification Opportunities for Itafos Corp and Conifex Timber

-0.49

Correlation Coefficient

Itafos Corp  Conifex Timber

Very good diversification

The 3 months correlation between Itafos and Conifex is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Itafos Corp and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Itafos Corp 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 Itafos Corp are associated (or correlated) with Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Itafos Corp i.e., Itafos Corp and Conifex Timber go up and down completely randomly.

Pair Corralation between Itafos Corp and Conifex Timber

Assuming the 90 days trading horizon Itafos Corp is expected to generate 0.54 times more return on investment than Conifex Timber. However, Itafos Corp is 1.85 times less risky than Conifex Timber. It trades about 0.17 of its potential returns per unit of risk. Conifex Timber is currently generating about -0.01 per unit of risk. If you would invest  177.00  in Itafos Corp on December 22, 2024 and sell it today you would earn a total of  52.00  from holding Itafos Corp or generate 29.38% return on investment over 90 days.

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

Itafos Corp  vs.  Conifex Timber

Itafos Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itafos Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Itafos Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Conifex Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Conifex Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Conifex Timber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Itafos Corp and Conifex Timber

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

The idea behind Itafos Corp and Conifex Timber 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.