Correlation Between Interfor and GreenFirst Forest

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

By analyzing existing cross correlation between Interfor and GreenFirst Forest Products, you can compare the effects of market volatilities on Interfor and GreenFirst Forest 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 GreenFirst Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interfor and GreenFirst Forest.

Diversification Opportunities for Interfor and GreenFirst Forest

0.62

Correlation Coefficient

Interfor  GreenFirst Forest

Poor diversification

The 3 months correlation between Interfor and GreenFirst is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Interfor and GreenFirst Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenFirst Forest 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 GreenFirst Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenFirst Forest has no effect on the direction of Interfor i.e., Interfor and GreenFirst Forest go up and down completely randomly.

Pair Corralation between Interfor and GreenFirst Forest

Assuming the 90 days horizon Interfor is expected to generate 0.89 times more return on investment than GreenFirst Forest. However, Interfor is 1.12 times less risky than GreenFirst Forest. It trades about -0.07 of its potential returns per unit of risk. GreenFirst Forest Products is currently generating about -0.06 per unit of risk. If you would invest  1,376  in Interfor on November 19, 2024 and sell it today you would lose (171.00) from holding Interfor or give up 12.43% of portfolio value over 90 days.

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

Interfor  vs.  GreenFirst Forest Products

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.

GreenFirst Forest

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenFirst Forest Products 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.

Pair Trading with Interfor and GreenFirst Forest

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

The idea behind Interfor and GreenFirst Forest Products 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.