Correlation Between Tree Island and Information Services

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

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

Diversification Opportunities for Tree Island and Information Services

-0.44

Correlation Coefficient

Tree Island  Information Services

Very good diversification

The 3 months correlation between Tree and Information is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and Tree Island 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 Tree Island Steel are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Tree Island i.e., Tree Island and Information Services go up and down completely randomly.

Pair Corralation between Tree Island and Information Services

Assuming the 90 days trading horizon Tree Island Steel is expected to under-perform the Information Services. In addition to that, Tree Island is 1.16 times more volatile than Information Services. It trades about -0.05 of its total potential returns per unit of risk. Information Services is currently generating about 0.22 per unit of volatility. If you would invest  2,661  in Information Services on April 29, 2025 and sell it today you would earn a total of  554.00  from holding Information Services or generate 20.82% return on investment over 90 days.

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

Tree Island Steel  vs.  Information Services

Tree Island Steel

Risk-Adjusted Performance

Very Weak

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.

Information Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Information Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree Island and Information Services

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

The idea behind Tree Island Steel and Information Services 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.