Correlation Between Transition Metals and Canlan Ice

Can any of the company-specific risk be diversified away by investing in both Transition Metals and Canlan Ice 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 Transition Metals and Canlan Ice into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transition Metals Corp and Canlan Ice Sports, you can compare the effects of market volatilities on Transition Metals and Canlan Ice 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 Transition Metals with a short position of Canlan Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transition Metals and Canlan Ice.

Diversification Opportunities for Transition Metals and Canlan Ice

-0.3

Correlation Coefficient

Transition Metals  Canlan Ice

Very good diversification

The 3 months correlation between Transition and Canlan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Transition Metals Corp and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and Transition Metals 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 Transition Metals Corp are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Transition Metals i.e., Transition Metals and Canlan Ice go up and down completely randomly.

Pair Corralation between Transition Metals and Canlan Ice

Assuming the 90 days horizon Transition Metals Corp is expected to under-perform the Canlan Ice. In addition to that, Transition Metals is 7.35 times more volatile than Canlan Ice Sports. It trades about -0.05 of its total potential returns per unit of risk. Canlan Ice Sports is currently generating about -0.09 per unit of volatility. If you would invest  407.00  in Canlan Ice Sports on October 7, 2024 and sell it today you would lose (19.00) from holding Canlan Ice Sports or give up 4.67% of portfolio value over 90 days.

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

Transition Metals Corp  vs.  Canlan Ice Sports

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Canlan Ice Sports

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transition Metals and Canlan Ice

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

The idea behind Transition Metals Corp and Canlan Ice Sports 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.