Correlation Between Weyerhaeuser and CKX Lands

Can any of the company-specific risk be diversified away by investing in both Weyerhaeuser and CKX Lands 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 Weyerhaeuser and CKX Lands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weyerhaeuser and CKX Lands, you can compare the effects of market volatilities on Weyerhaeuser and CKX Lands 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 Weyerhaeuser with a short position of CKX Lands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyerhaeuser and CKX Lands.

Diversification Opportunities for Weyerhaeuser and CKX Lands

-0.73

Correlation Coefficient

Weyerhaeuser  CKX Lands

Pay attention - limited upside

The 3 months correlation between Weyerhaeuser and CKX is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and CKX Lands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKX Lands and Weyerhaeuser 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 Weyerhaeuser are associated (or correlated) with CKX Lands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKX Lands has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and CKX Lands go up and down completely randomly.

Pair Corralation between Weyerhaeuser and CKX Lands

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the CKX Lands. But the stock apears to be less risky and, when comparing its historical volatility, Weyerhaeuser is 1.69 times less risky than CKX Lands. The stock trades about -0.2 of its potential returns per unit of risk. The CKX Lands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,342  in CKX Lands on March 3, 2024 and sell it today you would earn a total of  4.00  from holding CKX Lands or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Weyerhaeuser  vs.  CKX Lands

Weyerhaeuser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyerhaeuser has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

CKX Lands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKX Lands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, CKX Lands is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weyerhaeuser and CKX Lands

The main advantage of trading using opposite Weyerhaeuser and CKX Lands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyerhaeuser position performs unexpectedly, CKX Lands 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 CKX Lands will offset losses from the drop in CKX Lands' long position.

The idea behind Weyerhaeuser and CKX Lands pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.