Correlation Between Red Pine and Canaf Investments

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

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

Diversification Opportunities for Red Pine and Canaf Investments

-0.14

Correlation Coefficient

Red Pine  Canaf Investments

Good diversification

The 3 months correlation between Red and Canaf is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments and Red Pine 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 Red Pine Exploration are associated (or correlated) with Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Red Pine i.e., Red Pine and Canaf Investments go up and down completely randomly.

Pair Corralation between Red Pine and Canaf Investments

Assuming the 90 days horizon Red Pine Exploration is expected to under-perform the Canaf Investments. In addition to that, Red Pine is 1.11 times more volatile than Canaf Investments. It trades about -0.1 of its total potential returns per unit of risk. Canaf Investments is currently generating about 0.12 per unit of volatility. If you would invest  28.00  in Canaf Investments on October 21, 2024 and sell it today you would earn a total of  7.00  from holding Canaf Investments or generate 25.0% return on investment over 90 days.

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

Red Pine Exploration  vs.  Canaf Investments

Red Pine Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Pine Exploration 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 fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Canaf Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canaf Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Pine and Canaf Investments

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

The idea behind Red Pine Exploration and Canaf Investments 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 Global Correlations module to find global opportunities by holding instruments from different markets.