Correlation Between International Zeolite and West Fraser

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

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

Diversification Opportunities for International Zeolite and West Fraser

0.76

Correlation Coefficient

International Zeolite  West Fraser

Poor diversification

The 3 months correlation between International and West is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding International Zeolite Corp 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 International Zeolite 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 International Zeolite Corp 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 International Zeolite i.e., International Zeolite and West Fraser go up and down completely randomly.

Pair Corralation between International Zeolite and West Fraser

Given the investment horizon of 90 days International Zeolite Corp is expected to generate 8.04 times more return on investment than West Fraser. However, International Zeolite is 8.04 times more volatile than West Fraser Timber. It trades about 0.02 of its potential returns per unit of risk. West Fraser Timber is currently generating about -0.14 per unit of risk. If you would invest  2.00  in International Zeolite Corp on December 30, 2024 and sell it today you would lose (0.50) from holding International Zeolite Corp or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

International Zeolite Corp  vs.  West Fraser Timber

International Zeolite

Risk-Adjusted Performance

Weak

Over the last 90 days International Zeolite Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, International Zeolite showed solid returns over the last few months and may actually be approaching a breakup point.

West Fraser Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days West Fraser Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with International Zeolite and West Fraser

The main advantage of trading using opposite International Zeolite and West Fraser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Zeolite 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 International Zeolite Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.