Correlation Between Chatham Rock and Tilray

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

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

Diversification Opportunities for Chatham Rock and Tilray

-0.33

Correlation Coefficient

Chatham Rock  Tilray

Very good diversification

The 3 months correlation between Chatham and Tilray is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Rock Phosphate and Tilray Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tilray Inc and Chatham Rock 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 Chatham Rock Phosphate are associated (or correlated) with Tilray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tilray Inc has no effect on the direction of Chatham Rock i.e., Chatham Rock and Tilray go up and down completely randomly.

Pair Corralation between Chatham Rock and Tilray

Assuming the 90 days horizon Chatham Rock Phosphate is expected to generate 2.75 times more return on investment than Tilray. However, Chatham Rock is 2.75 times more volatile than Tilray Inc. It trades about 0.05 of its potential returns per unit of risk. Tilray Inc is currently generating about -0.07 per unit of risk. If you would invest  9.00  in Chatham Rock Phosphate on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Chatham Rock Phosphate or generate 11.11% return on investment over 90 days.

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

Chatham Rock Phosphate  vs.  Tilray Inc

Chatham Rock Phosphate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Rock Phosphate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chatham Rock showed solid returns over the last few months and may actually be approaching a breakup point.

Tilray Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tilray Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Chatham Rock and Tilray

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

The idea behind Chatham Rock Phosphate and Tilray Inc 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.