Correlation Between Weyerhaeuser and Equinix

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

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

Diversification Opportunities for Weyerhaeuser and Equinix

-0.52

Correlation Coefficient

Weyerhaeuser  Equinix

Excellent diversification

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

Pair Corralation between Weyerhaeuser and Equinix

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the Equinix. In addition to that, Weyerhaeuser is 1.25 times more volatile than Equinix. It trades about -0.1 of its total potential returns per unit of risk. Equinix is currently generating about 0.17 per unit of volatility. If you would invest  86,025  in Equinix on September 17, 2024 and sell it today you would earn a total of  10,475  from holding Equinix or generate 12.18% return on investment over 90 days.

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

Weyerhaeuser  vs.  Equinix

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Equinix

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Weyerhaeuser and Equinix

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

The idea behind Weyerhaeuser and Equinix 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.