Correlation Between Stella Jones and Simpson Manufacturing

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

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

Diversification Opportunities for Stella Jones and Simpson Manufacturing

0.0

Correlation Coefficient

Stella Jones  Simpson Manufacturing

Pay attention - limited upside

The 3 months correlation between Stella and Simpson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing and Stella Jones 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 Stella Jones are associated (or correlated) with Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of Stella Jones i.e., Stella Jones and Simpson Manufacturing go up and down completely randomly.

Pair Corralation between Stella Jones and Simpson Manufacturing

Assuming the 90 days horizon Stella Jones is expected to under-perform the Simpson Manufacturing. In addition to that, Stella Jones is 1.22 times more volatile than Simpson Manufacturing. It trades about -0.19 of its total potential returns per unit of risk. Simpson Manufacturing is currently generating about 0.08 per unit of volatility. If you would invest  17,379  in Simpson Manufacturing on September 2, 2024 and sell it today you would earn a total of  1,461  from holding Simpson Manufacturing or generate 8.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Stella Jones  vs.  Simpson Manufacturing

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones 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 forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Simpson Manufacturing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simpson Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Simpson Manufacturing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stella Jones and Simpson Manufacturing

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

The idea behind Stella Jones and Simpson Manufacturing 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.