Correlation Between Interfor and Western Forest
Can any of the company-specific risk be diversified away by investing in both Interfor 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 Interfor and Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Interfor and Western Forest Products, you can compare the effects of market volatilities on Interfor 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 Interfor with a short position of Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interfor and Western Forest.
Diversification Opportunities for Interfor and Western Forest
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Interfor and Western is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Interfor 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 Interfor 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 Interfor 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 Interfor i.e., Interfor and Western Forest go up and down completely randomly.
Pair Corralation between Interfor and Western Forest
Assuming the 90 days horizon Interfor is expected to generate 0.78 times more return on investment than Western Forest. However, Interfor is 1.28 times less risky than Western Forest. It trades about -0.03 of its potential returns per unit of risk. Western Forest Products is currently generating about -0.05 per unit of risk. If you would invest 1,162 in Interfor on November 9, 2024 and sell it today you would lose (19.00) from holding Interfor or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Interfor vs. Western Forest Products
Performance |
| Timeline |
| Interfor |
| Western Forest Products |
Interfor and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Interfor and Western Forest
The main advantage of trading using opposite Interfor and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interfor 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.| Interfor vs. Svenska Cellulosa Aktiebolaget | Interfor vs. Western Forest Products | Interfor vs. Stella Jones | Interfor vs. Simpson Manufacturing |
| Western Forest vs. Interfor | Western Forest vs. Svenska Cellulosa Aktiebolaget | Western Forest vs. Stella Jones | Western Forest vs. Simpson Manufacturing |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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