Correlation Between Stella Jones and Ufp Industries

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

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

Diversification Opportunities for Stella Jones and Ufp Industries

-0.38

Correlation Coefficient

Stella Jones  Ufp Industries

Very good diversification

The 3 months correlation between Stella and Ufp is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Ufp Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ufp Industries and Stella Jones 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 Stella Jones are associated (or correlated) with Ufp Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ufp Industries has no effect on the direction of Stella Jones i.e., Stella Jones and Ufp Industries go up and down completely randomly.

Pair Corralation between Stella Jones and Ufp Industries

Assuming the 90 days horizon Stella Jones is expected to under-perform the Ufp Industries. In addition to that, Stella Jones is 1.09 times more volatile than Ufp Industries. It trades about -0.19 of its total potential returns per unit of risk. Ufp Industries is currently generating about 0.13 per unit of volatility. If you would invest  11,654  in Ufp Industries on September 3, 2024 and sell it today you would earn a total of  1,936  from holding Ufp Industries or generate 16.61% return on investment over 90 days.

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

Stella Jones  vs.  Ufp Industries

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ufp Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ufp Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Ufp Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stella Jones and Ufp Industries

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

The idea behind Stella Jones and Ufp Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.