Correlation Between Weyerhaeuser and Outfront Media

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

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

Diversification Opportunities for Weyerhaeuser and Outfront Media

0.31

Correlation Coefficient

Weyerhaeuser  Outfront Media

Weak diversification

The 3 months correlation between Weyerhaeuser and Outfront is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Outfront Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outfront Media 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 Outfront Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outfront Media has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and Outfront Media go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Outfront Media

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to generate 6.09 times less return on investment than Outfront Media. In addition to that, Weyerhaeuser is 1.07 times more volatile than Outfront Media. It trades about 0.06 of its total potential returns per unit of risk. Outfront Media is currently generating about 0.4 per unit of volatility. If you would invest  1,726  in Outfront Media on September 4, 2024 and sell it today you would earn a total of  174.00  from holding Outfront Media or generate 10.08% return on investment over 90 days.

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

Weyerhaeuser  vs.  Outfront Media

Weyerhaeuser

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weyerhaeuser are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Weyerhaeuser may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Outfront Media

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outfront Media are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Outfront Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weyerhaeuser and Outfront Media

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

The idea behind Weyerhaeuser and Outfront Media 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.