Correlation Between Stella Jones and Western Forest
Can any of the company-specific risk be diversified away by investing in both Stella Jones 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 Stella Jones and Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stella Jones and Western Forest Products, you can compare the effects of market volatilities on Stella Jones 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 Stella Jones with a short position of Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stella Jones and Western Forest.
Diversification Opportunities for Stella Jones and Western Forest
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stella and Western is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones 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 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 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 Stella Jones i.e., Stella Jones and Western Forest go up and down completely randomly.
Pair Corralation between Stella Jones and Western Forest
Assuming the 90 days horizon Stella Jones is expected to under-perform the Western Forest. In addition to that, Stella Jones is 1.41 times more volatile than Western Forest Products. It trades about -0.24 of its total potential returns per unit of risk. Western Forest Products is currently generating about -0.15 per unit of volatility. If you would invest 36.00 in Western Forest Products on August 28, 2024 and sell it today you would lose (3.00) from holding Western Forest Products or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stella Jones vs. Western Forest Products
Performance |
| Timeline |
| Stella Jones |
| Western Forest Products |
Stella Jones and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stella Jones and Western Forest
The main advantage of trading using opposite Stella Jones and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones 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.| Stella Jones vs. Canfor | Stella Jones vs. West Fraser Timber | Stella Jones vs. Interfor | Stella Jones vs. Svenska Cellulosa Aktiebolaget |
| 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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