Correlation Between Weyerhaeuser and Iron Mountain

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

By analyzing existing cross correlation between Weyerhaeuser and Iron Mountain Incorporated, you can compare the effects of market volatilities on Weyerhaeuser and Iron Mountain 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 Iron Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyerhaeuser and Iron Mountain.

Diversification Opportunities for Weyerhaeuser and Iron Mountain

0.83

Correlation Coefficient

Weyerhaeuser  Iron Mountain

Very poor diversification

The 3 months correlation between Weyerhaeuser and Iron is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Iron Mountain Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Mountain rporated 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 Iron Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Mountain rporated has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and Iron Mountain go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Iron Mountain

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the Iron Mountain. In addition to that, Weyerhaeuser is as risky as Iron Mountain. It trades about -0.25 of its total potential returns per unit of risk. Iron Mountain Incorporated is currently generating about -0.18 per unit of volatility. If you would invest  7,968  in Iron Mountain Incorporated on January 18, 2024 and sell it today you would lose (453.00) from holding Iron Mountain Incorporated or give up 5.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Weyerhaeuser  vs.  Iron Mountain Incorporated

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 fairly strong basic indicators, Weyerhaeuser is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Iron Mountain rporated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iron Mountain Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Iron Mountain displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weyerhaeuser and Iron Mountain

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

The idea behind Weyerhaeuser and Iron Mountain Incorporated 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.