Correlation Between National Storm and Canfor

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

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

Diversification Opportunities for National Storm and Canfor

-0.04

Correlation Coefficient

National Storm  Canfor

Good diversification

The 3 months correlation between National and Canfor is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding National Storm Recovery and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and National Storm 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 National Storm Recovery are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of National Storm i.e., National Storm and Canfor go up and down completely randomly.

Pair Corralation between National Storm and Canfor

Given the investment horizon of 90 days National Storm Recovery is expected to under-perform the Canfor. In addition to that, National Storm is 6.93 times more volatile than Canfor. It trades about -0.09 of its total potential returns per unit of risk. Canfor is currently generating about 0.04 per unit of volatility. If you would invest  1,030  in Canfor on December 27, 2024 and sell it today you would earn a total of  37.00  from holding Canfor or generate 3.59% return on investment over 90 days.

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

National Storm Recovery  vs.  Canfor

National Storm Recovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Storm Recovery 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 basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canfor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canfor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Storm and Canfor

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

The idea behind National Storm Recovery and Canfor 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.