Correlation Between Stella Jones and Simpson Manufacturing
Can any of the company-specific risk be diversified away by investing in both Stella Jones and Simpson Manufacturing 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 Stella Jones and Simpson Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stella Jones and Simpson Manufacturing, you can compare the effects of market volatilities on Stella Jones and Simpson Manufacturing 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 Stella Jones with a short position of Simpson Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stella Jones and Simpson Manufacturing.
Diversification Opportunities for Stella Jones and Simpson Manufacturing
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Stella and Simpson is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing and Stella Jones 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 Stella Jones are associated (or correlated) with Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of Stella Jones i.e., Stella Jones and Simpson Manufacturing go up and down completely randomly.
Pair Corralation between Stella Jones and Simpson Manufacturing
Assuming the 90 days horizon Stella Jones is expected to generate 1.39 times less return on investment than Simpson Manufacturing. In addition to that, Stella Jones is 1.15 times more volatile than Simpson Manufacturing. It trades about 0.05 of its total potential returns per unit of risk. Simpson Manufacturing is currently generating about 0.08 per unit of volatility. If you would invest 9,180 in Simpson Manufacturing on August 24, 2024 and sell it today you would earn a total of 9,297 from holding Simpson Manufacturing or generate 101.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 83.27% |
| Values | Daily Returns |
Stella Jones vs. Simpson Manufacturing
Performance |
| Timeline |
| Stella Jones |
| Simpson Manufacturing |
Stella Jones and Simpson Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stella Jones and Simpson Manufacturing
The main advantage of trading using opposite Stella Jones and Simpson Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones position performs unexpectedly, Simpson Manufacturing 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 Simpson Manufacturing will offset losses from the drop in Simpson Manufacturing's long position.| Stella Jones vs. Canfor | Stella Jones vs. West Fraser Timber | Stella Jones vs. Interfor | Stella Jones vs. Svenska Cellulosa Aktiebolaget |
| Simpson Manufacturing vs. West Fraser Timber | Simpson Manufacturing vs. Interfor | Simpson Manufacturing vs. Ufp Industries | Simpson Manufacturing vs. Canfor |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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