Correlation Between United States and Weyerhaeuser
Can any of the company-specific risk be diversified away by investing in both United States and Weyerhaeuser 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 United States and Weyerhaeuser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Weyerhaeuser, you can compare the effects of market volatilities on United States and Weyerhaeuser 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 United States with a short position of Weyerhaeuser. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Weyerhaeuser.
Diversification Opportunities for United States and Weyerhaeuser
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Weyerhaeuser is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser and United States 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 United States Steel are associated (or correlated) with Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of United States i.e., United States and Weyerhaeuser go up and down completely randomly.
Pair Corralation between United States and Weyerhaeuser
Taking into account the 90-day investment horizon United States Steel is expected to generate 1.41 times more return on investment than Weyerhaeuser. However, United States is 1.41 times more volatile than Weyerhaeuser. It trades about -0.24 of its potential returns per unit of risk. Weyerhaeuser is currently generating about -0.41 per unit of risk. If you would invest 4,025 in United States Steel on January 25, 2024 and sell it today you would lose (365.00) from holding United States Steel or give up 9.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Weyerhaeuser
Performance |
| Timeline |
| United States Steel |
| Weyerhaeuser |
United States and Weyerhaeuser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Weyerhaeuser
The main advantage of trading using opposite United States and Weyerhaeuser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Weyerhaeuser 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 Weyerhaeuser will offset losses from the drop in Weyerhaeuser's long position.| United States vs. Cleveland Cliffs | United States vs. Reliance Steel Aluminum | United States vs. Ternium SA ADR |
| Weyerhaeuser vs. Rayonier | Weyerhaeuser vs. Lamar Advertising | Weyerhaeuser vs. Farmland Partners | Weyerhaeuser vs. Gladstone Land |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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