Correlation Between Tree Island and Alaska Energy

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

By analyzing existing cross correlation between Tree Island Steel and Alaska Energy Metals, you can compare the effects of market volatilities on Tree Island and Alaska Energy 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 Tree Island with a short position of Alaska Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Alaska Energy.

Diversification Opportunities for Tree Island and Alaska Energy

-0.73

Correlation Coefficient

Tree Island  Alaska Energy

Pay attention - limited upside

The 3 months correlation between Tree and Alaska is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Alaska Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Energy Metals and Tree Island 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 Tree Island Steel are associated (or correlated) with Alaska Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Energy Metals has no effect on the direction of Tree Island i.e., Tree Island and Alaska Energy go up and down completely randomly.

Pair Corralation between Tree Island and Alaska Energy

Assuming the 90 days trading horizon Tree Island Steel is expected to generate 0.61 times more return on investment than Alaska Energy. However, Tree Island Steel is 1.63 times less risky than Alaska Energy. It trades about 0.06 of its potential returns per unit of risk. Alaska Energy Metals is currently generating about -0.21 per unit of risk. If you would invest  258.00  in Tree Island Steel on September 18, 2024 and sell it today you would earn a total of  22.00  from holding Tree Island Steel or generate 8.53% return on investment over 90 days.

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

Tree Island Steel  vs.  Alaska Energy Metals

Tree Island Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Tree Island may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alaska Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alaska Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Tree Island and Alaska Energy

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

The idea behind Tree Island Steel and Alaska Energy 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..