Correlation Between IA Financial and Tree Island

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

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

Diversification Opportunities for IA Financial and Tree Island

-0.48

Correlation Coefficient

IA Financial  Tree Island

Very good diversification

The 3 months correlation between IAG and Tree is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial 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 IA Financial 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 iA Financial 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 IA Financial i.e., IA Financial and Tree Island go up and down completely randomly.

Pair Corralation between IA Financial and Tree Island

Assuming the 90 days trading horizon iA Financial is expected to generate 0.6 times more return on investment than Tree Island. However, iA Financial is 1.66 times less risky than Tree Island. It trades about 0.15 of its potential returns per unit of risk. Tree Island Steel is currently generating about 0.01 per unit of risk. If you would invest  13,082  in iA Financial on April 24, 2025 and sell it today you would earn a total of  1,230  from holding iA Financial or generate 9.4% return on investment over 90 days.

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

iA Financial  vs.  Tree Island Steel

iA Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IA Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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.

Pair Trading with IA Financial and Tree Island

The main advantage of trading using opposite IA Financial and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial 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 iA Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.