Correlation Between West Fraser and Ufp Industries
Can any of the company-specific risk be diversified away by investing in both West Fraser and Ufp Industries 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 Ufp Industries 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 Ufp Industries, you can compare the effects of market volatilities on West Fraser and Ufp Industries 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 Ufp Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Fraser and Ufp Industries.
Diversification Opportunities for West Fraser and Ufp Industries
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between West and Ufp is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and Ufp Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ufp Industries 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 Ufp Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ufp Industries has no effect on the direction of West Fraser i.e., West Fraser and Ufp Industries go up and down completely randomly.
Pair Corralation between West Fraser and Ufp Industries
Considering the 90-day investment horizon West Fraser Timber is expected to under-perform the Ufp Industries. But the stock apears to be less risky and, when comparing its historical volatility, West Fraser Timber is 1.64 times less risky than Ufp Industries. The stock trades about -0.07 of its potential returns per unit of risk. The Ufp Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 13,157 in Ufp Industries on August 27, 2024 and sell it today you would earn a total of 150.00 from holding Ufp Industries or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Fraser Timber vs. Ufp Industries
Performance |
| Timeline |
| West Fraser Timber |
| Ufp Industries |
West Fraser and Ufp Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Fraser and Ufp Industries
The main advantage of trading using opposite West Fraser and Ufp Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Fraser position performs unexpectedly, Ufp Industries 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 Ufp Industries will offset losses from the drop in Ufp Industries' long position.| West Fraser vs. Simpson Manufacturing | West Fraser vs. Interfor | West Fraser vs. Ufp Industries | West Fraser vs. Canfor |
| Ufp Industries vs. West Fraser Timber | Ufp Industries vs. Canfor | Ufp Industries vs. Stella Jones | Ufp Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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