Correlation Between Simpson Manufacturing and Western Forest
Can any of the company-specific risk be diversified away by investing in both Simpson Manufacturing 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 Simpson Manufacturing and Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simpson Manufacturing and Western Forest Products, you can compare the effects of market volatilities on Simpson Manufacturing 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 Simpson Manufacturing with a short position of Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simpson Manufacturing and Western Forest.
Diversification Opportunities for Simpson Manufacturing and Western Forest
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Simpson and Western is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Simpson Manufacturing 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 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 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 Simpson Manufacturing i.e., Simpson Manufacturing and Western Forest go up and down completely randomly.
Pair Corralation between Simpson Manufacturing and Western Forest
Considering the 90-day investment horizon Simpson Manufacturing is expected to generate 0.65 times more return on investment than Western Forest. However, Simpson Manufacturing is 1.55 times less risky than Western Forest. It trades about 0.0 of its potential returns per unit of risk. Western Forest Products is currently generating about -0.07 per unit of risk. If you would invest 17,972 in Simpson Manufacturing on November 9, 2024 and sell it today you would lose (1,201) from holding Simpson Manufacturing or give up 6.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.27% |
| Values | Daily Returns |
Simpson Manufacturing vs. Western Forest Products
Performance |
| Timeline |
| Simpson Manufacturing |
| Western Forest Products |
Simpson Manufacturing and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simpson Manufacturing and Western Forest
The main advantage of trading using opposite Simpson Manufacturing and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simpson Manufacturing 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.| Simpson Manufacturing vs. West Fraser Timber | Simpson Manufacturing vs. Interfor | Simpson Manufacturing vs. Ufp Industries | Simpson Manufacturing vs. Canfor |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |