Correlation Between Conifex Timber and Western Forest
Can any of the company-specific risk be diversified away by investing in both Conifex Timber and Western Forest 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 Conifex Timber and Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Conifex Timber and Western Forest Products, you can compare the effects of market volatilities on Conifex Timber and Western Forest 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 Conifex Timber with a short position of Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conifex Timber and Western Forest.
Diversification Opportunities for Conifex Timber and Western Forest
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Conifex and Western is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Conifex Timber and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products and Conifex Timber 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 Conifex Timber are associated (or correlated) with Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Conifex Timber i.e., Conifex Timber and Western Forest go up and down completely randomly.
Pair Corralation between Conifex Timber and Western Forest
Assuming the 90 days trading horizon Conifex Timber is expected to under-perform the Western Forest. In addition to that, Conifex Timber is 1.39 times more volatile than Western Forest Products. It trades about -0.15 of its total potential returns per unit of risk. Western Forest Products is currently generating about -0.1 per unit of volatility. If you would invest 50.00 in Western Forest Products on August 25, 2024 and sell it today you would lose (5.00) from holding Western Forest Products or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Conifex Timber vs. Western Forest Products
Performance |
| Timeline |
| Conifex Timber |
| Western Forest Products |
Conifex Timber and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Conifex Timber and Western Forest
The main advantage of trading using opposite Conifex Timber and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conifex Timber position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.| Conifex Timber vs. Western Forest Products | Conifex Timber vs. Interfor Corp | Conifex Timber vs. Canfor Pulp Products | Conifex Timber vs. Canfor |
| Western Forest vs. Interfor Corp | Western Forest vs. Canfor | Western Forest vs. West Fraser Timber | Western Forest vs. Stella Jones |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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