Correlation Between Interfor and Canfor

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

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

Diversification Opportunities for Interfor and Canfor

0.16

Correlation Coefficient

Interfor  Canfor

Average diversification

The 3 months correlation between Interfor and Canfor is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Interfor and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Interfor 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 Interfor 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 Interfor i.e., Interfor and Canfor go up and down completely randomly.

Pair Corralation between Interfor and Canfor

Assuming the 90 days horizon Interfor is expected to under-perform the Canfor. In addition to that, Interfor is 1.49 times more volatile than Canfor. It trades about -0.04 of its total potential returns per unit of risk. Canfor is currently generating about 0.02 per unit of volatility. If you would invest  1,038  in Canfor on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Canfor or generate 0.77% return on investment over 90 days.

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

Interfor  vs.  Canfor

Interfor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interfor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Canfor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canfor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Interfor and Canfor

The main advantage of trading using opposite Interfor and Canfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interfor 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 Interfor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.