Correlation Between Weyerhaeuser and Franklin Street

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

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

Diversification Opportunities for Weyerhaeuser and Franklin Street

-0.68

Correlation Coefficient

Weyerhaeuser  Franklin Street

Excellent diversification

The 3 months correlation between Weyerhaeuser and Franklin is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Franklin Street Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Street Prop 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 Franklin Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Street Prop has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and Franklin Street go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Franklin Street

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the Franklin Street. But the stock apears to be less risky and, when comparing its historical volatility, Weyerhaeuser is 2.2 times less risky than Franklin Street. The stock trades about -0.07 of its potential returns per unit of risk. The Franklin Street Properties is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Franklin Street Properties on September 16, 2024 and sell it today you would earn a total of  31.00  from holding Franklin Street Properties or generate 18.24% return on investment over 90 days.

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

Weyerhaeuser  vs.  Franklin Street Properties

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Franklin Street Prop

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Street Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Franklin Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weyerhaeuser and Franklin Street

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

The idea behind Weyerhaeuser and Franklin Street Properties 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.