Correlation Between Weyerhaeuser and PotlatchDeltic

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

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

Diversification Opportunities for Weyerhaeuser and PotlatchDeltic

0.54

Correlation Coefficient

Weyerhaeuser  PotlatchDeltic

Very weak diversification

The 3 months correlation between Weyerhaeuser and PotlatchDeltic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and PotlatchDeltic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PotlatchDeltic and Weyerhaeuser 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 Weyerhaeuser are associated (or correlated) with PotlatchDeltic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PotlatchDeltic has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and PotlatchDeltic go up and down completely randomly.

Pair Corralation between Weyerhaeuser and PotlatchDeltic

Assuming the 90 days horizon Weyerhaeuser is expected to under-perform the PotlatchDeltic. But the stock apears to be less risky and, when comparing its historical volatility, Weyerhaeuser is 1.23 times less risky than PotlatchDeltic. The stock trades about -0.09 of its potential returns per unit of risk. The PotlatchDeltic is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,798  in PotlatchDeltic on October 11, 2024 and sell it today you would lose (18.00) from holding PotlatchDeltic or give up 0.47% of portfolio value over 90 days.

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

Weyerhaeuser  vs.  PotlatchDeltic

Weyerhaeuser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyerhaeuser 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.

PotlatchDeltic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Weyerhaeuser and PotlatchDeltic

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

The idea behind Weyerhaeuser and PotlatchDeltic 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.