Correlation Between Lumber Futures and 23291KAJ4

Can any of the company-specific risk be diversified away by investing in both Lumber Futures and 23291KAJ4 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 Lumber Futures and 23291KAJ4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lumber Futures and DH EUROPE FINANCE, you can compare the effects of market volatilities on Lumber Futures and 23291KAJ4 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 Lumber Futures with a short position of 23291KAJ4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumber Futures and 23291KAJ4.

Diversification Opportunities for Lumber Futures and 23291KAJ4

-0.76

Correlation Coefficient

Lumber Futures  23291KAJ4

Pay attention - limited upside

The 3 months correlation between Lumber and 23291KAJ4 is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lumber Futures and DH EUROPE FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DH EUROPE FINANCE and Lumber Futures 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 Lumber Futures are associated (or correlated) with 23291KAJ4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DH EUROPE FINANCE has no effect on the direction of Lumber Futures i.e., Lumber Futures and 23291KAJ4 go up and down completely randomly.

Pair Corralation between Lumber Futures and 23291KAJ4

Assuming the 90 days horizon Lumber Futures is expected to generate 2.16 times more return on investment than 23291KAJ4. However, Lumber Futures is 2.16 times more volatile than DH EUROPE FINANCE. It trades about 0.03 of its potential returns per unit of risk. DH EUROPE FINANCE is currently generating about -0.1 per unit of risk. If you would invest  52,850  in Lumber Futures on October 5, 2024 and sell it today you would earn a total of  1,200  from holding Lumber Futures or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Lumber Futures  vs.  DH EUROPE FINANCE

Lumber Futures

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lumber Futures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lumber Futures is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DH EUROPE FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DH EUROPE FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 23291KAJ4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumber Futures and 23291KAJ4

The main advantage of trading using opposite Lumber Futures and 23291KAJ4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumber Futures position performs unexpectedly, 23291KAJ4 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 23291KAJ4 will offset losses from the drop in 23291KAJ4's long position.

The idea behind Lumber Futures and DH EUROPE FINANCE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.