Correlation Between World Copper and Tree Island

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

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

Diversification Opportunities for World Copper and Tree Island

0.05

Correlation Coefficient

World Copper  Tree Island

Significant diversification

The 3 months correlation between World and Tree is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding World Copper and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel and World Copper 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 World Copper are associated (or correlated) with Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of World Copper i.e., World Copper and Tree Island go up and down completely randomly.

Pair Corralation between World Copper and Tree Island

Assuming the 90 days horizon World Copper is expected to under-perform the Tree Island. In addition to that, World Copper is 4.12 times more volatile than Tree Island Steel. It trades about -0.07 of its total potential returns per unit of risk. Tree Island Steel is currently generating about -0.05 per unit of volatility. If you would invest  308.00  in Tree Island Steel on December 3, 2024 and sell it today you would lose (23.00) from holding Tree Island Steel or give up 7.47% of portfolio value over 90 days.

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

World Copper  vs.  Tree Island Steel

World Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days World Copper 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Tree Island Steel

Risk-Adjusted Performance

Very 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 latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with World Copper and Tree Island

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

The idea behind World Copper and Tree Island Steel 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.