Correlation Between West Fraser and Wajax
Can any of the company-specific risk be diversified away by investing in both West Fraser and Wajax 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 West Fraser and Wajax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Fraser Timber and Wajax, you can compare the effects of market volatilities on West Fraser and Wajax 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 West Fraser with a short position of Wajax. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Fraser and Wajax.
Diversification Opportunities for West Fraser and Wajax
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between West and Wajax is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and Wajax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wajax and West Fraser 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 West Fraser Timber are associated (or correlated) with Wajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wajax has no effect on the direction of West Fraser i.e., West Fraser and Wajax go up and down completely randomly.
Pair Corralation between West Fraser and Wajax
Assuming the 90 days trading horizon West Fraser Timber is expected to generate 0.51 times more return on investment than Wajax. However, West Fraser Timber is 1.96 times less risky than Wajax. It trades about 0.07 of its potential returns per unit of risk. Wajax is currently generating about -0.18 per unit of risk. If you would invest 13,487 in West Fraser Timber on August 29, 2024 and sell it today you would earn a total of 353.00 from holding West Fraser Timber or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Fraser Timber vs. Wajax
Performance |
| Timeline |
| West Fraser Timber |
| Wajax |
West Fraser and Wajax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Fraser and Wajax
The main advantage of trading using opposite West Fraser and Wajax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Fraser position performs unexpectedly, Wajax 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 Wajax will offset losses from the drop in Wajax's long position.| West Fraser vs. Interfor Corp | West Fraser vs. Canfor | West Fraser vs. Stella Jones | West Fraser vs. Western Forest Products |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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