Correlation Between CCL Industries and Tree Island

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

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

Diversification Opportunities for CCL Industries and Tree Island

0.36

Correlation Coefficient

CCL Industries  Tree Island

Weak diversification

The 3 months correlation between CCL and Tree is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries 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 CCL Industries 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 CCL Industries 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 CCL Industries i.e., CCL Industries and Tree Island go up and down completely randomly.

Pair Corralation between CCL Industries and Tree Island

Assuming the 90 days trading horizon CCL Industries is expected to under-perform the Tree Island. But the stock apears to be less risky and, when comparing its historical volatility, CCL Industries is 1.43 times less risky than Tree Island. The stock trades about -0.01 of its potential returns per unit of risk. The Tree Island Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  253.00  in Tree Island Steel on May 11, 2025 and sell it today you would lose (1.00) from holding Tree Island Steel or give up 0.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

CCL Industries  vs.  Tree Island Steel

CCL Industries

Risk-Adjusted Performance

Weakest

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CCL Industries is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tree Island Steel

Risk-Adjusted Performance

Weakest

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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CCL Industries and Tree Island

The main advantage of trading using opposite CCL Industries and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CCL Industries 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 CCL Industries 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.