Correlation Between Simpson Manufacturing and Ufp Industries

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

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

Diversification Opportunities for Simpson Manufacturing and Ufp Industries

0.64

Correlation Coefficient

Simpson Manufacturing  Ufp Industries

Poor diversification

The 3 months correlation between Simpson and Ufp is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Simpson Manufacturing and Ufp Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ufp Industries and Simpson Manufacturing 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 Simpson Manufacturing are associated (or correlated) with Ufp Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ufp Industries has no effect on the direction of Simpson Manufacturing i.e., Simpson Manufacturing and Ufp Industries go up and down completely randomly.

Pair Corralation between Simpson Manufacturing and Ufp Industries

Considering the 90-day investment horizon Simpson Manufacturing is expected to under-perform the Ufp Industries. In addition to that, Simpson Manufacturing is 1.05 times more volatile than Ufp Industries. It trades about -0.03 of its total potential returns per unit of risk. Ufp Industries is currently generating about -0.01 per unit of volatility. If you would invest  11,182  in Ufp Industries on December 28, 2024 and sell it today you would lose (173.00) from holding Ufp Industries or give up 1.55% of portfolio value over 90 days.

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

Simpson Manufacturing  vs.  Ufp Industries

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.

Ufp Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ufp Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Ufp Industries is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Simpson Manufacturing and Ufp Industries

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

The idea behind Simpson Manufacturing and Ufp Industries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.