Correlation Between Buhler Industries and Western Forest
Can any of the company-specific risk be diversified away by investing in both Buhler Industries and Western Forest 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 Buhler Industries and Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Buhler Industries and Western Forest Products, you can compare the effects of market volatilities on Buhler Industries and Western Forest 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 Buhler Industries with a short position of Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buhler Industries and Western Forest.
Diversification Opportunities for Buhler Industries and Western Forest
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Buhler and Western is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products and Buhler Industries 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 Buhler Industries are associated (or correlated) with Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Buhler Industries i.e., Buhler Industries and Western Forest go up and down completely randomly.
Pair Corralation between Buhler Industries and Western Forest
Assuming the 90 days trading horizon Buhler Industries is expected to generate 0.7 times more return on investment than Western Forest. However, Buhler Industries is 1.43 times less risky than Western Forest. It trades about 0.12 of its potential returns per unit of risk. Western Forest Products is currently generating about 0.02 per unit of risk. If you would invest 240.00 in Buhler Industries on September 11, 2024 and sell it today you would earn a total of 49.00 from holding Buhler Industries or generate 20.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Buhler Industries vs. Western Forest Products
Performance |
Timeline |
Buhler Industries |
Western Forest Products |
Buhler Industries and Western Forest Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Buhler Industries and Western Forest
The main advantage of trading using opposite Buhler Industries and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buhler Industries position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.Buhler Industries vs. Clarke Inc | Buhler Industries vs. Accord Financial Corp | Buhler Industries vs. ADF Group | Buhler Industries vs. Algoma Central |
Western Forest vs. Interfor Corp | Western Forest vs. Canfor | Western Forest vs. West Fraser Timber | Western Forest vs. Stella Jones |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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