Correlation Between Weyerhaeuser and Power REIT

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

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

Diversification Opportunities for Weyerhaeuser and Power REIT

-0.17

Correlation Coefficient

Weyerhaeuser  Power REIT

Good diversification

The 3 months correlation between Weyerhaeuser and Power is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT 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 Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and Power REIT go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Power REIT

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the Power REIT. But the stock apears to be less risky and, when comparing its historical volatility, Weyerhaeuser is 10.86 times less risky than Power REIT. The stock trades about -0.19 of its potential returns per unit of risk. The Power REIT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  96.00  in Power REIT on September 21, 2024 and sell it today you would earn a total of  15.00  from holding Power REIT or generate 15.63% return on investment over 90 days.

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

Weyerhaeuser  vs.  Power REIT

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.

Power REIT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weyerhaeuser and Power REIT

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

The idea behind Weyerhaeuser and Power REIT 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.