Correlation Between Tree Island and Energy Fuels

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

Diversification Opportunities for Tree Island and Energy Fuels

-0.06

Correlation Coefficient

Tree Island  Energy Fuels

Good diversification

The 3 months correlation between Tree and Energy is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fuels 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 Energy Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fuels has no effect on the direction of Tree Island i.e., Tree Island and Energy Fuels go up and down completely randomly.

Pair Corralation between Tree Island and Energy Fuels

Assuming the 90 days trading horizon Tree Island Steel is expected to under-perform the Energy Fuels. But the stock apears to be less risky and, when comparing its historical volatility, Tree Island Steel is 1.85 times less risky than Energy Fuels. The stock trades about -0.01 of its potential returns per unit of risk. The Energy Fuels is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  776.00  in Energy Fuels on October 24, 2024 and sell it today you would earn a total of  20.00  from holding Energy Fuels or generate 2.58% return on investment over 90 days.

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

Tree Island Steel  vs.  Energy Fuels

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 February 2025.

Energy Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tree Island and Energy Fuels

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

The idea behind Tree Island Steel and Energy Fuels 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.