Correlation Between Tree Island and Canadian Net

Can any of the company-specific risk be diversified away by investing in both Tree Island and Canadian Net 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 Canadian Net 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 Canadian Net Real, you can compare the effects of market volatilities on Tree Island and Canadian Net 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 Canadian Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Canadian Net.

Diversification Opportunities for Tree Island and Canadian Net

0.3

Correlation Coefficient

Tree Island  Canadian Net

Weak diversification

The 3 months correlation between Tree and Canadian is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Canadian Net Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Net Real 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 Canadian Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Net Real has no effect on the direction of Tree Island i.e., Tree Island and Canadian Net go up and down completely randomly.

Pair Corralation between Tree Island and Canadian Net

Assuming the 90 days trading horizon Tree Island Steel is expected to under-perform the Canadian Net. In addition to that, Tree Island is 1.46 times more volatile than Canadian Net Real. It trades about -0.02 of its total potential returns per unit of risk. Canadian Net Real is currently generating about 0.08 per unit of volatility. If you would invest  527.00  in Canadian Net Real on May 8, 2025 and sell it today you would earn a total of  23.00  from holding Canadian Net Real or generate 4.36% return on investment over 90 days.

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

Tree Island Steel  vs.  Canadian Net Real

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.

Canadian Net Real

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Net Real are ranked lower than 6 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tree Island and Canadian Net

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

The idea behind Tree Island Steel and Canadian Net Real 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.