Correlation Between Tree Island and Spin Master

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

Diversification Opportunities for Tree Island and Spin Master

0.61

Correlation Coefficient

Tree Island  Spin Master

Poor diversification

The 3 months correlation between Tree and Spin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Spin Master Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spin Master 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 Spin Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spin Master Corp has no effect on the direction of Tree Island i.e., Tree Island and Spin Master go up and down completely randomly.

Pair Corralation between Tree Island and Spin Master

Assuming the 90 days trading horizon Tree Island Steel is expected to under-perform the Spin Master. In addition to that, Tree Island is 2.28 times more volatile than Spin Master Corp. It trades about -0.15 of its total potential returns per unit of risk. Spin Master Corp is currently generating about -0.24 per unit of volatility. If you would invest  3,361  in Spin Master Corp on October 26, 2024 and sell it today you would lose (172.00) from holding Spin Master Corp or give up 5.12% of portfolio value over 90 days.

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

Tree Island Steel  vs.  Spin Master Corp

Tree Island Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Spin Master Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tree Island and Spin Master

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

The idea behind Tree Island Steel and Spin Master 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.