Correlation Between Timbercreek Financial and Russel Metals

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

By analyzing existing cross correlation between Timbercreek Financial Corp and Russel Metals, you can compare the effects of market volatilities on Timbercreek Financial and Russel Metals 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 Timbercreek Financial with a short position of Russel Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timbercreek Financial and Russel Metals.

Diversification Opportunities for Timbercreek Financial and Russel Metals

0.54

Correlation Coefficient

Timbercreek Financial  Russel Metals

Very weak diversification

The 3 months correlation between Timbercreek and Russel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and Russel Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russel Metals and Timbercreek Financial 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 Timbercreek Financial Corp are associated (or correlated) with Russel Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russel Metals has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and Russel Metals go up and down completely randomly.

Pair Corralation between Timbercreek Financial and Russel Metals

Assuming the 90 days horizon Timbercreek Financial Corp is expected to under-perform the Russel Metals. But the stock apears to be less risky and, when comparing its historical volatility, Timbercreek Financial Corp is 1.33 times less risky than Russel Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Russel Metals is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,114  in Russel Metals on December 28, 2024 and sell it today you would lose (183.00) from holding Russel Metals or give up 4.45% of portfolio value over 90 days.

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

Timbercreek Financial Corp  vs.  Russel Metals

Timbercreek Financial

Risk-Adjusted Performance

Very Weak

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

Russel Metals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Timbercreek Financial and Russel Metals

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

The idea behind Timbercreek Financial Corp and Russel Metals 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.