Correlation Between Stella Jones and West Fraser
Can any of the company-specific risk be diversified away by investing in both Stella Jones and West Fraser 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 West Fraser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stella Jones and West Fraser Timber, you can compare the effects of market volatilities on Stella Jones and West Fraser 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 West Fraser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stella Jones and West Fraser.
Diversification Opportunities for Stella Jones and West Fraser
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Stella and West is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber 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 West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Stella Jones i.e., Stella Jones and West Fraser go up and down completely randomly.
Pair Corralation between Stella Jones and West Fraser
Assuming the 90 days horizon Stella Jones is expected to under-perform the West Fraser. In addition to that, Stella Jones is 2.15 times more volatile than West Fraser Timber. It trades about -0.3 of its total potential returns per unit of risk. West Fraser Timber is currently generating about -0.02 per unit of volatility. If you would invest 9,550 in West Fraser Timber on August 25, 2024 and sell it today you would lose (104.00) from holding West Fraser Timber or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stella Jones vs. West Fraser Timber
Performance |
| Timeline |
| Stella Jones |
| West Fraser Timber |
Stella Jones and West Fraser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stella Jones and West Fraser
The main advantage of trading using opposite Stella Jones and West Fraser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones position performs unexpectedly, West Fraser 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 West Fraser will offset losses from the drop in West Fraser's long position.| Stella Jones vs. Canfor | Stella Jones vs. West Fraser Timber | Stella Jones vs. Interfor | Stella Jones vs. Svenska Cellulosa Aktiebolaget |
| West Fraser vs. Simpson Manufacturing | West Fraser vs. Interfor | West Fraser vs. Ufp Industries | West Fraser 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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