Correlation Between Laurentian Bank and Tree Island

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Can any of the company-specific risk be diversified away by investing in both Laurentian Bank 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 Laurentian Bank and Tree Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laurentian Bank of and Tree Island Steel, you can compare the effects of market volatilities on Laurentian Bank 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 Laurentian Bank with a short position of Tree Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and Tree Island.

Diversification Opportunities for Laurentian Bank and Tree Island

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Laurentian and Tree is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank of 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 Laurentian Bank 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 Laurentian Bank of 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 Laurentian Bank i.e., Laurentian Bank and Tree Island go up and down completely randomly.

Pair Corralation between Laurentian Bank and Tree Island

Assuming the 90 days trading horizon Laurentian Bank of is expected to generate 0.42 times more return on investment than Tree Island. However, Laurentian Bank of is 2.39 times less risky than Tree Island. It trades about 0.31 of its potential returns per unit of risk. Tree Island Steel is currently generating about -0.07 per unit of risk. If you would invest  2,057  in Laurentian Bank of on May 4, 2025 and sell it today you would earn a total of  270.00  from holding Laurentian Bank of or generate 13.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Laurentian Bank of  vs.  Tree Island Steel

 Performance 
       Timeline  
Laurentian Bank 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank of are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Laurentian Bank may actually be approaching a critical reversion point that can send shares even higher in September 2025.
Tree Island Steel 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.

Laurentian Bank and Tree Island Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Laurentian Bank and Tree Island

The main advantage of trading using opposite Laurentian Bank and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank 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 Laurentian Bank of 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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