Correlation Between West Fraser and GreenFirst Forest

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

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

Diversification Opportunities for West Fraser and GreenFirst Forest

0.57

Correlation Coefficient

West Fraser  GreenFirst Forest

Very weak diversification

The 3 months correlation between West and GreenFirst is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and GreenFirst Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenFirst Forest and West Fraser 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 West Fraser Timber are associated (or correlated) with GreenFirst Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenFirst Forest has no effect on the direction of West Fraser i.e., West Fraser and GreenFirst Forest go up and down completely randomly.

Pair Corralation between West Fraser and GreenFirst Forest

Considering the 90-day investment horizon West Fraser is expected to generate 594.34 times less return on investment than GreenFirst Forest. But when comparing it to its historical volatility, West Fraser Timber is 69.96 times less risky than GreenFirst Forest. It trades about 0.01 of its potential returns per unit of risk. GreenFirst Forest Products is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  640.00  in GreenFirst Forest Products on October 7, 2024 and sell it today you would lose (270.00) from holding GreenFirst Forest Products or give up 42.19% of portfolio value over 90 days.

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

West Fraser Timber  vs.  GreenFirst Forest Products

West Fraser Timber

Risk-Adjusted Performance

0 of 100

Very Weak

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

GreenFirst Forest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenFirst Forest Products 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with West Fraser and GreenFirst Forest

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

The idea behind West Fraser Timber and GreenFirst Forest Products 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.