Correlation Between Weyerhaeuser and Essential Properties

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

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

Diversification Opportunities for Weyerhaeuser and Essential Properties

0.52

Correlation Coefficient

Weyerhaeuser  Essential Properties

Very weak diversification

The 3 months correlation between Weyerhaeuser and Essential is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties 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 Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and Essential Properties go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Essential Properties

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the Essential Properties. In addition to that, Weyerhaeuser is 1.19 times more volatile than Essential Properties Realty. It trades about -0.19 of its total potential returns per unit of risk. Essential Properties Realty is currently generating about -0.09 per unit of volatility. If you would invest  3,420  in Essential Properties Realty on September 21, 2024 and sell it today you would lose (267.00) from holding Essential Properties Realty or give up 7.81% of portfolio value over 90 days.

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

Weyerhaeuser  vs.  Essential Properties Realty

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Essential Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essential Properties Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Weyerhaeuser and Essential Properties

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

The idea behind Weyerhaeuser and Essential Properties Realty 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.