Correlation Between Weyerhaeuser and Alexanders

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

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

Diversification Opportunities for Weyerhaeuser and Alexanders

0.63

Correlation Coefficient

Weyerhaeuser  Alexanders

Poor diversification

The 3 months correlation between Weyerhaeuser and Alexanders is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Alexanders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexanders 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 Alexanders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexanders has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and Alexanders go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Alexanders

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to generate 0.94 times more return on investment than Alexanders. However, Weyerhaeuser is 1.07 times less risky than Alexanders. It trades about 0.09 of its potential returns per unit of risk. Alexanders is currently generating about 0.0 per unit of risk. If you would invest  3,009  in Weyerhaeuser on September 2, 2024 and sell it today you would earn a total of  217.00  from holding Weyerhaeuser or generate 7.21% return on investment over 90 days.

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

Weyerhaeuser  vs.  Alexanders

Weyerhaeuser

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weyerhaeuser are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Weyerhaeuser may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alexanders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexanders has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Alexanders is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weyerhaeuser and Alexanders

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

The idea behind Weyerhaeuser and Alexanders 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.