Correlation Between Tree Island and Tincorp Metals

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

Diversification Opportunities for Tree Island and Tincorp Metals

-0.06

Correlation Coefficient

Tree Island  Tincorp Metals

Good diversification

The 3 months correlation between Tree and Tincorp is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Tincorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tincorp Metals 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 Tincorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tincorp Metals has no effect on the direction of Tree Island i.e., Tree Island and Tincorp Metals go up and down completely randomly.

Pair Corralation between Tree Island and Tincorp Metals

Assuming the 90 days trading horizon Tree Island is expected to generate 37.62 times less return on investment than Tincorp Metals. But when comparing it to its historical volatility, Tree Island Steel is 2.08 times less risky than Tincorp Metals. It trades about 0.0 of its potential returns per unit of risk. Tincorp Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Tincorp Metals on April 23, 2025 and sell it today you would earn a total of  2.00  from holding Tincorp Metals or generate 13.33% return on investment over 90 days.

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

Tree Island Steel  vs.  Tincorp Metals

Tree Island Steel

Risk-Adjusted Performance

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.

Tincorp Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tincorp Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tincorp Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree Island and Tincorp Metals

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

The idea behind Tree Island Steel and Tincorp Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.