Correlation Between Weyerhaeuser and United States

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

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

Diversification Opportunities for Weyerhaeuser and United States

0.0

Correlation Coefficient

Weyerhaeuser  United States

Pay attention - limited upside

The 3 months correlation between Weyerhaeuser and United is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Weyerhaeuser i.e., Weyerhaeuser and United States go up and down completely randomly.

Pair Corralation between Weyerhaeuser and United States

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Weyerhaeuser is 2.01 times less risky than United States. The stock trades about -0.01 of its potential returns per unit of risk. The United States Steel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,439  in United States Steel on January 31, 2024 and sell it today you would earn a total of  1,257  from holding United States Steel or generate 51.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Weyerhaeuser  vs.  United States Steel

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 fairly strong basic indicators, Weyerhaeuser is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Weyerhaeuser and United States

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

The idea behind Weyerhaeuser and United States Steel 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..