Correlation Between Canadian Net and Tree Island

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

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

Diversification Opportunities for Canadian Net and Tree Island

-0.17

Correlation Coefficient

Canadian Net  Tree Island

Good diversification

The 3 months correlation between Canadian and Tree is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Net Real 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 Canadian Net 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 Canadian Net Real 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 Canadian Net i.e., Canadian Net and Tree Island go up and down completely randomly.

Pair Corralation between Canadian Net and Tree Island

Assuming the 90 days trading horizon Canadian Net Real is expected to generate 0.71 times more return on investment than Tree Island. However, Canadian Net Real is 1.41 times less risky than Tree Island. It trades about 0.09 of its potential returns per unit of risk. Tree Island Steel is currently generating about 0.0 per unit of risk. If you would invest  529.00  in Canadian Net Real on May 9, 2025 and sell it today you would earn a total of  29.00  from holding Canadian Net Real or generate 5.48% return on investment over 90 days.

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

Canadian Net Real  vs.  Tree Island Steel

Canadian Net Real

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Net Real are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canadian Net is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canadian Net and Tree Island

The main advantage of trading using opposite Canadian Net and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Net 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 Canadian Net Real 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..