Correlation Between Sangoma Technologies and West Fraser

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

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

Diversification Opportunities for Sangoma Technologies and West Fraser

0.61

Correlation Coefficient

Sangoma Technologies  West Fraser

Poor diversification

The 3 months correlation between Sangoma and West is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sangoma Technologies Corp and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber and Sangoma Technologies 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 Sangoma Technologies Corp are associated (or correlated) with West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Sangoma Technologies i.e., Sangoma Technologies and West Fraser go up and down completely randomly.

Pair Corralation between Sangoma Technologies and West Fraser

Assuming the 90 days trading horizon Sangoma Technologies Corp is expected to under-perform the West Fraser. In addition to that, Sangoma Technologies is 2.22 times more volatile than West Fraser Timber. It trades about -0.31 of its total potential returns per unit of risk. West Fraser Timber is currently generating about -0.3 per unit of volatility. If you would invest  12,266  in West Fraser Timber on December 3, 2024 and sell it today you would lose (1,172) from holding West Fraser Timber 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

Sangoma Technologies Corp  vs.  West Fraser Timber

Sangoma Technologies Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sangoma Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

West Fraser Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days West Fraser Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sangoma Technologies and West Fraser

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

The idea behind Sangoma Technologies Corp and West Fraser Timber 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.