Correlation Between West Fraser and Interfor

Can any of the company-specific risk be diversified away by investing in both West Fraser 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 West Fraser and Interfor 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 Interfor, you can compare the effects of market volatilities on West Fraser 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 West Fraser with a short position of Interfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Fraser and Interfor.

Diversification Opportunities for West Fraser and Interfor

0.83

Correlation Coefficient

West Fraser  Interfor

Very poor diversification

The 3 months correlation between West and Interfor is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and Interfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interfor 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 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 West Fraser i.e., West Fraser and Interfor go up and down completely randomly.

Pair Corralation between West Fraser and Interfor

Considering the 90-day investment horizon West Fraser Timber is expected to under-perform the Interfor. But the stock apears to be less risky and, when comparing its historical volatility, West Fraser Timber is 1.73 times less risky than Interfor. The stock trades about -0.23 of its potential returns per unit of risk. The Interfor is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,456  in Interfor on November 28, 2024 and sell it today you would lose (293.00) from holding Interfor or give up 20.12% of portfolio value over 90 days.

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

West Fraser Timber  vs.  Interfor

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. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with West Fraser and Interfor

The main advantage of trading using opposite West Fraser and Interfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Fraser 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 West Fraser Timber 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.