Correlation Between West Fraser and First Majestic
Can any of the company-specific risk be diversified away by investing in both West Fraser and First Majestic 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 First Majestic 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 First Majestic Silver, you can compare the effects of market volatilities on West Fraser and First Majestic 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 First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Fraser and First Majestic.
Diversification Opportunities for West Fraser and First Majestic
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between West and First is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver 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 First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of West Fraser i.e., West Fraser and First Majestic go up and down completely randomly.
Pair Corralation between West Fraser and First Majestic
Considering the 90-day investment horizon West Fraser Timber is expected to generate 0.61 times more return on investment than First Majestic. However, West Fraser Timber is 1.65 times less risky than First Majestic. It trades about 0.01 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.32 per unit of risk. If you would invest 9,451 in West Fraser Timber on August 24, 2024 and sell it today you would lose (5.00) from holding West Fraser Timber or give up 0.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Fraser Timber vs. First Majestic Silver
Performance |
| Timeline |
| West Fraser Timber |
| First Majestic Silver |
West Fraser and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Fraser and First Majestic
The main advantage of trading using opposite West Fraser and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Fraser position performs unexpectedly, First Majestic 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 First Majestic will offset losses from the drop in First Majestic's long position.| West Fraser vs. Simpson Manufacturing | West Fraser vs. Interfor | West Fraser vs. Ufp Industries | West Fraser vs. Canfor |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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