Correlation Between Rayonier and Boise Cascade

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

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

Diversification Opportunities for Rayonier and Boise Cascade

0.62

Correlation Coefficient

Rayonier  Boise Cascade

Poor diversification

The 3 months correlation between Rayonier and Boise is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier and Boise Cascade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boise Cascade and Rayonier 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 Rayonier are associated (or correlated) with Boise Cascade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boise Cascade has no effect on the direction of Rayonier i.e., Rayonier and Boise Cascade go up and down completely randomly.

Pair Corralation between Rayonier and Boise Cascade

Assuming the 90 days horizon Rayonier is expected to generate 0.62 times more return on investment than Boise Cascade. However, Rayonier is 1.61 times less risky than Boise Cascade. It trades about -0.37 of its potential returns per unit of risk. Boise Cascade is currently generating about -0.35 per unit of risk. If you would invest  2,786  in Rayonier on September 24, 2024 and sell it today you would lose (266.00) from holding Rayonier or give up 9.55% of portfolio value over 90 days.

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

Rayonier  vs.  Boise Cascade

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 nearly stable basic indicators, Rayonier is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Boise Cascade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boise Cascade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Boise Cascade is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rayonier and Boise Cascade

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

The idea behind Rayonier and Boise Cascade 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.