Correlation Between Franklin Street and Weyerhaeuser

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

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

Diversification Opportunities for Franklin Street and Weyerhaeuser

0.16

Correlation Coefficient

Franklin Street  Weyerhaeuser

Average diversification

The 3 months correlation between Franklin and Weyerhaeuser is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Street Properties and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser and Franklin Street 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 Franklin Street Properties are associated (or correlated) with Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of Franklin Street i.e., Franklin Street and Weyerhaeuser go up and down completely randomly.

Pair Corralation between Franklin Street and Weyerhaeuser

Considering the 90-day investment horizon Franklin Street Properties is expected to under-perform the Weyerhaeuser. In addition to that, Franklin Street is 2.13 times more volatile than Weyerhaeuser. It trades about -0.14 of its total potential returns per unit of risk. Weyerhaeuser is currently generating about -0.18 per unit of volatility. If you would invest  3,418  in Weyerhaeuser on January 30, 2024 and sell it today you would lose (313.00) from holding Weyerhaeuser or give up 9.16% of portfolio value over 90 days.

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

Franklin Street Properties  vs.  Weyerhaeuser

Franklin Street Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Street Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Franklin Street and Weyerhaeuser

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

The idea behind Franklin Street Properties and Weyerhaeuser 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.