Correlation Between Mason Graphite and Canada Carbon

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

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

Diversification Opportunities for Mason Graphite and Canada Carbon

-0.08

Correlation Coefficient

Mason Graphite  Canada Carbon

Good diversification

The 3 months correlation between Mason and Canada is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mason Graphite and Canada Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Carbon and Mason Graphite 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 Mason Graphite are associated (or correlated) with Canada Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Carbon has no effect on the direction of Mason Graphite i.e., Mason Graphite and Canada Carbon go up and down completely randomly.

Pair Corralation between Mason Graphite and Canada Carbon

Assuming the 90 days horizon Mason Graphite is expected to generate 99.04 times less return on investment than Canada Carbon. But when comparing it to its historical volatility, Mason Graphite is 2.37 times less risky than Canada Carbon. It trades about 0.0 of its potential returns per unit of risk. Canada Carbon is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Canada Carbon on September 29, 2024 and sell it today you would lose (3.00) from holding Canada Carbon or give up 75.0% of portfolio value over 90 days.

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

Mason Graphite  vs.  Canada Carbon

Mason Graphite

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mason Graphite are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mason Graphite showed solid returns over the last few months and may actually be approaching a breakup point.

Canada Carbon

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Carbon are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canada Carbon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mason Graphite and Canada Carbon

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

The idea behind Mason Graphite and Canada Carbon 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.