Correlation Between Canfor and Rayonier

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

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

Diversification Opportunities for Canfor and Rayonier

0.85

Correlation Coefficient

Canfor  Rayonier

Very poor diversification

The 3 months correlation between Canfor and Rayonier is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and Rayonier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier and Canfor 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 Canfor are associated (or correlated) with Rayonier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier has no effect on the direction of Canfor i.e., Canfor and Rayonier go up and down completely randomly.

Pair Corralation between Canfor and Rayonier

Assuming the 90 days horizon Canfor is expected to under-perform the Rayonier. In addition to that, Canfor is 1.55 times more volatile than Rayonier. It trades about -0.11 of its total potential returns per unit of risk. Rayonier is currently generating about -0.14 per unit of volatility. If you would invest  2,694  in Rayonier on October 12, 2024 and sell it today you would lose (274.00) from holding Rayonier or give up 10.17% of portfolio value over 90 days.

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

Canfor  vs.  Rayonier

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rayonier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canfor and Rayonier

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

The idea behind Canfor and Rayonier 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.