Correlation Between Jewett Cameron and Simpson Manufacturing

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

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

Diversification Opportunities for Jewett Cameron and Simpson Manufacturing

0.36

Correlation Coefficient

Jewett Cameron  Simpson Manufacturing

Weak diversification

The 3 months correlation between Jewett and Simpson is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Jewett Cameron Trading and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing and Jewett Cameron 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 Jewett Cameron Trading are associated (or correlated) with Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of Jewett Cameron i.e., Jewett Cameron and Simpson Manufacturing go up and down completely randomly.

Pair Corralation between Jewett Cameron and Simpson Manufacturing

Given the investment horizon of 90 days Jewett Cameron Trading is expected to generate 2.28 times more return on investment than Simpson Manufacturing. However, Jewett Cameron is 2.28 times more volatile than Simpson Manufacturing. It trades about 0.06 of its potential returns per unit of risk. Simpson Manufacturing is currently generating about -0.03 per unit of risk. If you would invest  421.00  in Jewett Cameron Trading on December 29, 2024 and sell it today you would earn a total of  39.00  from holding Jewett Cameron Trading or generate 9.26% return on investment over 90 days.

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

Jewett Cameron Trading  vs.  Simpson Manufacturing

Jewett Cameron Trading

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jewett Cameron Trading are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Jewett Cameron exhibited solid returns over the last few months and may actually be approaching a breakup point.

Simpson Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simpson Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Simpson Manufacturing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jewett Cameron and Simpson Manufacturing

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

The idea behind Jewett Cameron Trading and Simpson Manufacturing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.