Correlation Between Timbercreek Financial and CHAR Technologies

Can any of the company-specific risk be diversified away by investing in both Timbercreek Financial and CHAR Technologies 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 CHAR Technologies 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 CHAR Technologies, you can compare the effects of market volatilities on Timbercreek Financial and CHAR Technologies 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 CHAR Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timbercreek Financial and CHAR Technologies.

Diversification Opportunities for Timbercreek Financial and CHAR Technologies

0.02

Correlation Coefficient

Timbercreek Financial  CHAR Technologies

Significant diversification

The 3 months correlation between Timbercreek and CHAR is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and CHAR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAR Technologies 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 CHAR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAR Technologies has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and CHAR Technologies go up and down completely randomly.

Pair Corralation between Timbercreek Financial and CHAR Technologies

Assuming the 90 days horizon Timbercreek Financial Corp is expected to under-perform the CHAR Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Timbercreek Financial Corp is 5.42 times less risky than CHAR Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The CHAR Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  17.00  in CHAR Technologies on December 30, 2024 and sell it today you would earn a total of  1.00  from holding CHAR Technologies or generate 5.88% return on investment over 90 days.

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

Timbercreek Financial Corp  vs.  CHAR Technologies

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.

CHAR Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHAR Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CHAR Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timbercreek Financial and CHAR Technologies

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

The idea behind Timbercreek Financial Corp and CHAR Technologies 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.