Correlation Between Aclara Resources and West Fraser

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

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

Diversification Opportunities for Aclara Resources and West Fraser

-0.5

Correlation Coefficient

Aclara Resources  West Fraser

Very good diversification

The 3 months correlation between Aclara and West is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aclara Resources and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber and Aclara Resources 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 Aclara Resources are associated (or correlated) with West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Aclara Resources i.e., Aclara Resources and West Fraser go up and down completely randomly.

Pair Corralation between Aclara Resources and West Fraser

Assuming the 90 days trading horizon Aclara Resources is expected to generate 2.73 times more return on investment than West Fraser. However, Aclara Resources is 2.73 times more volatile than West Fraser Timber. It trades about 0.03 of its potential returns per unit of risk. West Fraser Timber is currently generating about 0.07 per unit of risk. If you would invest  40.00  in Aclara Resources on September 4, 2024 and sell it today you would earn a total of  3.00  from holding Aclara Resources or generate 7.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Aclara Resources  vs.  West Fraser Timber

Aclara Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aclara Resources 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

West Fraser Timber

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in West Fraser Timber are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, West Fraser displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aclara Resources and West Fraser

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

The idea behind Aclara Resources and West Fraser Timber 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.