Correlation Between Safe and Conifex Timber

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

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

Diversification Opportunities for Safe and Conifex Timber

0.8

Correlation Coefficient

Safe  Conifex Timber

Very poor diversification

The 3 months correlation between Safe and Conifex is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Safe and Green and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Safe 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 Safe and Green are associated (or correlated) with Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Safe i.e., Safe and Conifex Timber go up and down completely randomly.

Pair Corralation between Safe and Conifex Timber

Considering the 90-day investment horizon Safe and Green is expected to under-perform the Conifex Timber. In addition to that, Safe is 1.83 times more volatile than Conifex Timber. It trades about -0.13 of its total potential returns per unit of risk. Conifex Timber is currently generating about -0.15 per unit of volatility. If you would invest  33.00  in Conifex Timber on December 28, 2024 and sell it today you would lose (11.00) from holding Conifex Timber or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Safe and Green  vs.  Conifex Timber

Safe and Green

Risk-Adjusted Performance

Very Weak

Over the last 90 days Safe and Green has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Conifex Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Conifex Timber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Safe and Conifex Timber

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

The idea behind Safe and Green and Conifex Timber 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.