Correlation Between Equity Commonwealth and Weyerhaeuser

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

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

Diversification Opportunities for Equity Commonwealth and Weyerhaeuser

-0.47

Correlation Coefficient

Equity Commonwealth  Weyerhaeuser

Very good diversification

The 3 months correlation between Equity and Weyerhaeuser is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Equity Commonwealth and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser and Equity Commonwealth 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 Equity Commonwealth are associated (or correlated) with Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of Equity Commonwealth i.e., Equity Commonwealth and Weyerhaeuser go up and down completely randomly.

Pair Corralation between Equity Commonwealth and Weyerhaeuser

Considering the 90-day investment horizon Equity Commonwealth is expected to under-perform the Weyerhaeuser. In addition to that, Equity Commonwealth is 1.18 times more volatile than Weyerhaeuser. It trades about -0.08 of its total potential returns per unit of risk. Weyerhaeuser is currently generating about 0.07 per unit of volatility. If you would invest  2,770  in Weyerhaeuser on December 30, 2024 and sell it today you would earn a total of  166.00  from holding Weyerhaeuser or generate 5.99% return on investment over 90 days.

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

Equity Commonwealth  vs.  Weyerhaeuser

Equity Commonwealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Commonwealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Weyerhaeuser

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weyerhaeuser are ranked lower than 5 (%) 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 April 2025.

Pair Trading with Equity Commonwealth and Weyerhaeuser

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

The idea behind Equity Commonwealth and Weyerhaeuser 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.