Correlation Between Simpson Manufacturing and Nature Wood
Can any of the company-specific risk be diversified away by investing in both Simpson Manufacturing and Nature Wood 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 Simpson Manufacturing and Nature Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simpson Manufacturing and Nature Wood Group, you can compare the effects of market volatilities on Simpson Manufacturing and Nature Wood 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 Simpson Manufacturing with a short position of Nature Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simpson Manufacturing and Nature Wood.
Diversification Opportunities for Simpson Manufacturing and Nature Wood
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Simpson and Nature is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Simpson Manufacturing and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood Group and Simpson Manufacturing 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 Simpson Manufacturing are associated (or correlated) with Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of Simpson Manufacturing i.e., Simpson Manufacturing and Nature Wood go up and down completely randomly.
Pair Corralation between Simpson Manufacturing and Nature Wood
Considering the 90-day investment horizon Simpson Manufacturing is expected to generate 0.5 times more return on investment than Nature Wood. However, Simpson Manufacturing is 1.99 times less risky than Nature Wood. It trades about 0.08 of its potential returns per unit of risk. Nature Wood Group is currently generating about -0.03 per unit of risk. If you would invest 18,056 in Simpson Manufacturing on August 28, 2024 and sell it today you would earn a total of 1,637 from holding Simpson Manufacturing or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simpson Manufacturing vs. Nature Wood Group
Performance |
| Timeline |
| Simpson Manufacturing |
| Nature Wood Group |
Simpson Manufacturing and Nature Wood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simpson Manufacturing and Nature Wood
The main advantage of trading using opposite Simpson Manufacturing and Nature Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simpson Manufacturing position performs unexpectedly, Nature Wood 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 Nature Wood will offset losses from the drop in Nature Wood's long position.| Simpson Manufacturing vs. West Fraser Timber | Simpson Manufacturing vs. Interfor | Simpson Manufacturing vs. Ufp Industries | Simpson Manufacturing vs. Canfor |
| Nature Wood vs. Summit Materials | Nature Wood vs. KNOT Offshore Partners | Nature Wood vs. Contagious Gaming | Nature Wood vs. Yuexiu Transport Infrastructure |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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