Correlation Between Ufp Industries and Interfor

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

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

Diversification Opportunities for Ufp Industries and Interfor

0.67

Correlation Coefficient

Ufp Industries  Interfor

Poor diversification

The 3 months correlation between Ufp and Interfor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ufp Industries and Interfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interfor 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 Interfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interfor has no effect on the direction of Ufp Industries i.e., Ufp Industries and Interfor go up and down completely randomly.

Pair Corralation between Ufp Industries and Interfor

Given the investment horizon of 90 days Ufp Industries is expected to generate 0.52 times more return on investment than Interfor. However, Ufp Industries is 1.92 times less risky than Interfor. It trades about -0.05 of its potential returns per unit of risk. Interfor is currently generating about -0.04 per unit of risk. If you would invest  11,182  in Ufp Industries on December 29, 2024 and sell it today you would lose (551.00) from holding Ufp Industries or give up 4.93% 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.  Interfor

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.

Interfor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interfor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ufp Industries and Interfor

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

The idea behind Ufp Industries and Interfor 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.