Correlation Between Supremex and Taiga Building

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

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

Diversification Opportunities for Supremex and Taiga Building

-0.35

Correlation Coefficient

Supremex  Taiga Building

Very good diversification

The 3 months correlation between Supremex and Taiga is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Supremex and Taiga Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiga Building Products and Supremex 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 Supremex are associated (or correlated) with Taiga Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiga Building Products has no effect on the direction of Supremex i.e., Supremex and Taiga Building go up and down completely randomly.

Pair Corralation between Supremex and Taiga Building

Assuming the 90 days trading horizon Supremex is expected to generate 2.14 times more return on investment than Taiga Building. However, Supremex is 2.14 times more volatile than Taiga Building Products. It trades about 0.08 of its potential returns per unit of risk. Taiga Building Products is currently generating about -0.04 per unit of risk. If you would invest  366.00  in Supremex on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Supremex or generate 11.48% return on investment over 90 days.

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

Supremex  vs.  Taiga Building Products

Supremex

Risk-Adjusted Performance

Modest

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

Taiga Building Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiga Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Taiga Building is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Supremex and Taiga Building

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

The idea behind Supremex and Taiga Building Products 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.