Correlation Between Tree Island and NeXGold Mining

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

Diversification Opportunities for Tree Island and NeXGold Mining

-0.55

Correlation Coefficient

Tree Island  NeXGold Mining

Excellent diversification

The 3 months correlation between Tree and NeXGold is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and NeXGold Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeXGold Mining Corp 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 NeXGold Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeXGold Mining Corp has no effect on the direction of Tree Island i.e., Tree Island and NeXGold Mining go up and down completely randomly.

Pair Corralation between Tree Island and NeXGold Mining

Assuming the 90 days trading horizon Tree Island Steel is expected to generate 0.79 times more return on investment than NeXGold Mining. However, Tree Island Steel is 1.27 times less risky than NeXGold Mining. It trades about 0.03 of its potential returns per unit of risk. NeXGold Mining Corp is currently generating about -0.01 per unit of risk. If you would invest  291.00  in Tree Island Steel on October 11, 2024 and sell it today you would earn a total of  6.00  from holding Tree Island Steel or generate 2.06% return on investment over 90 days.

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

Tree Island Steel  vs.  NeXGold Mining Corp

Tree Island Steel

Risk-Adjusted Performance

0 of 100

Weak

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

NeXGold Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NeXGold Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, NeXGold Mining is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tree Island and NeXGold Mining

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

The idea behind Tree Island Steel and NeXGold Mining Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.