Correlation Between Boise Cascade and Canfor

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

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

Diversification Opportunities for Boise Cascade and Canfor

0.65

Correlation Coefficient

Boise Cascade  Canfor

Poor diversification

The 3 months correlation between Boise and Canfor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Boise Cascade and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Boise Cascade 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 Boise Cascade are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Boise Cascade i.e., Boise Cascade and Canfor go up and down completely randomly.

Pair Corralation between Boise Cascade and Canfor

Assuming the 90 days horizon Boise Cascade is expected to generate 1.03 times more return on investment than Canfor. However, Boise Cascade is 1.03 times more volatile than Canfor. It trades about -0.35 of its potential returns per unit of risk. Canfor is currently generating about -0.37 per unit of risk. If you would invest  13,684  in Boise Cascade on September 24, 2024 and sell it today you would lose (1,929) from holding Boise Cascade or give up 14.1% of portfolio value over 90 days.

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

Boise Cascade  vs.  Canfor

Boise Cascade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boise Cascade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Boise Cascade is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Canfor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canfor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canfor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boise Cascade and Canfor

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

The idea behind Boise Cascade and Canfor 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.