Correlation Between Conifex Timber and Canfor Pulp

Can any of the company-specific risk be diversified away by investing in both Conifex Timber and Canfor Pulp 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 Conifex Timber and Canfor Pulp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Conifex Timber and Canfor Pulp Products, you can compare the effects of market volatilities on Conifex Timber and Canfor Pulp 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 Conifex Timber with a short position of Canfor Pulp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conifex Timber and Canfor Pulp.

Diversification Opportunities for Conifex Timber and Canfor Pulp

0.39

Correlation Coefficient

Conifex Timber  Canfor Pulp

Weak diversification

The 3 months correlation between Conifex and Canfor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Conifex Timber and Canfor Pulp Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor Pulp Products and Conifex Timber 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 Conifex Timber are associated (or correlated) with Canfor Pulp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor Pulp Products has no effect on the direction of Conifex Timber i.e., Conifex Timber and Canfor Pulp go up and down completely randomly.

Pair Corralation between Conifex Timber and Canfor Pulp

Assuming the 90 days trading horizon Conifex Timber is expected to generate 1.36 times more return on investment than Canfor Pulp. However, Conifex Timber is 1.36 times more volatile than Canfor Pulp Products. It trades about -0.03 of its potential returns per unit of risk. Canfor Pulp Products is currently generating about -0.05 per unit of risk. If you would invest  118.00  in Conifex Timber on September 7, 2024 and sell it today you would lose (76.00) from holding Conifex Timber or give up 64.41% of portfolio value over 90 days.

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

Conifex Timber  vs.  Canfor Pulp Products

Conifex Timber

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Conifex Timber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Conifex Timber displayed solid returns over the last few months and may actually be approaching a breakup point.

Canfor Pulp Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor Pulp Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canfor Pulp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Conifex Timber and Canfor Pulp

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

The idea behind Conifex Timber and Canfor Pulp Products 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.