Correlation Between UFP Industries and Rayonier

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

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

Diversification Opportunities for UFP Industries and Rayonier

0.64

Correlation Coefficient

UFP Industries  Rayonier

Poor diversification

The 3 months correlation between UFP and Rayonier is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding UFP Industries and Rayonier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier and UFP Industries 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 UFP Industries 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 UFP Industries i.e., UFP Industries and Rayonier go up and down completely randomly.

Pair Corralation between UFP Industries and Rayonier

Assuming the 90 days horizon UFP Industries is expected to under-perform the Rayonier. In addition to that, UFP Industries is 1.38 times more volatile than Rayonier. It trades about -0.41 of its total potential returns per unit of risk. Rayonier is currently generating about -0.37 per unit of volatility. 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

UFP Industries  vs.  Rayonier

UFP Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with UFP Industries and Rayonier

The main advantage of trading using opposite UFP Industries and Rayonier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UFP Industries 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 UFP Industries 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.