Correlation Between Western Forest and Enviva Partners
Can any of the company-specific risk be diversified away by investing in both Western Forest and Enviva Partners 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 Western Forest and Enviva Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Forest Products and Enviva Partners LP, you can compare the effects of market volatilities on Western Forest and Enviva Partners 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 Western Forest with a short position of Enviva Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Forest and Enviva Partners.
Diversification Opportunities for Western Forest and Enviva Partners
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Enviva is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Western Forest Products and Enviva Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enviva Partners LP and Western Forest 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 Western Forest Products are associated (or correlated) with Enviva Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enviva Partners LP has no effect on the direction of Western Forest i.e., Western Forest and Enviva Partners go up and down completely randomly.
Pair Corralation between Western Forest and Enviva Partners
Assuming the 90 days horizon Western Forest Products is expected to generate 0.26 times more return on investment than Enviva Partners. However, Western Forest Products is 3.8 times less risky than Enviva Partners. It trades about -0.07 of its potential returns per unit of risk. Enviva Partners LP is currently generating about -0.05 per unit of risk. If you would invest 81.00 in Western Forest Products on August 24, 2024 and sell it today you would lose (49.00) from holding Western Forest Products or give up 60.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.29% |
| Values | Daily Returns |
Western Forest Products vs. Enviva Partners LP
Performance |
| Timeline |
| Western Forest Products |
| Enviva Partners LP |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Western Forest and Enviva Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Forest and Enviva Partners
The main advantage of trading using opposite Western Forest and Enviva Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Forest position performs unexpectedly, Enviva Partners 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 Enviva Partners will offset losses from the drop in Enviva Partners' long position.| Western Forest vs. Interfor | Western Forest vs. Svenska Cellulosa Aktiebolaget | Western Forest vs. Stella Jones | Western Forest vs. Simpson Manufacturing |
| Enviva Partners vs. Ufp Industries | Enviva Partners vs. Simpson Manufacturing | Enviva Partners vs. Interfor | Enviva Partners 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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