Correlation Between James Hardie and Boise Cascad

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

By analyzing existing cross correlation between James Hardie Industries and Boise Cascad Llc, you can compare the effects of market volatilities on James Hardie and Boise Cascad 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 James Hardie with a short position of Boise Cascad. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Hardie and Boise Cascad.

Diversification Opportunities for James Hardie and Boise Cascad

0.12

Correlation Coefficient

James Hardie  Boise Cascad

Average diversification

The 3 months correlation between James and Boise is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Boise Cascad Llc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boise Cascad Llc and James Hardie 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 James Hardie Industries are associated (or correlated) with Boise Cascad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boise Cascad Llc has no effect on the direction of James Hardie i.e., James Hardie and Boise Cascad go up and down completely randomly.

Pair Corralation between James Hardie and Boise Cascad

Considering the 90-day investment horizon James Hardie is expected to generate 10.22 times less return on investment than Boise Cascad. In addition to that, James Hardie is 1.16 times more volatile than Boise Cascad Llc. It trades about 0.01 of its total potential returns per unit of risk. Boise Cascad Llc is currently generating about 0.13 per unit of volatility. If you would invest  12,463  in Boise Cascad Llc on September 3, 2024 and sell it today you would earn a total of  2,289  from holding Boise Cascad Llc or generate 18.37% return on investment over 90 days.

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

James Hardie Industries  vs.  Boise Cascad Llc

James Hardie Industries

Risk-Adjusted Performance

0 of 100

Weak

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

Boise Cascad Llc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boise Cascad Llc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Boise Cascad exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with James Hardie and Boise Cascad

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

The idea behind James Hardie Industries and Boise Cascad Llc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.