Correlation Between Ufp Industries and Canfor

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

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

Diversification Opportunities for Ufp Industries and Canfor

0.84

Correlation Coefficient

Ufp Industries  Canfor

Very poor diversification

The 3 months correlation between Ufp and Canfor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ufp Industries and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Ufp 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 Ufp Industries are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Ufp Industries i.e., Ufp Industries and Canfor go up and down completely randomly.

Pair Corralation between Ufp Industries and Canfor

Given the investment horizon of 90 days Ufp Industries is expected to generate 1.25 times more return on investment than Canfor. However, Ufp Industries is 1.25 times more volatile than Canfor. It trades about 0.17 of its potential returns per unit of risk. Canfor is currently generating about -0.01 per unit of risk. If you would invest  12,351  in Ufp Industries on September 5, 2024 and sell it today you would earn a total of  1,081  from holding Ufp Industries or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Ufp Industries  vs.  Canfor

Ufp Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ufp Industries are ranked lower than 10 (%) 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.

Canfor

Risk-Adjusted Performance

9 of 100

Good

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

Pair Trading with Ufp Industries and Canfor

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

The idea behind Ufp Industries and Canfor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.