Correlation Between Boise Cascad and West Fraser

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

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

Diversification Opportunities for Boise Cascad and West Fraser

0.59

Correlation Coefficient

Boise Cascad  West Fraser

Very weak diversification

The 3 months correlation between Boise and West is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Boise Cascad Llc and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber and Boise Cascad 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 Boise Cascad Llc are associated (or correlated) with West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Boise Cascad i.e., Boise Cascad and West Fraser go up and down completely randomly.

Pair Corralation between Boise Cascad and West Fraser

Considering the 90-day investment horizon Boise Cascad Llc is expected to generate 1.18 times more return on investment than West Fraser. However, Boise Cascad is 1.18 times more volatile than West Fraser Timber. It trades about -0.03 of its potential returns per unit of risk. West Fraser Timber is currently generating about -0.04 per unit of risk. If you would invest  8,689  in Boise Cascad Llc on May 7, 2025 and sell it today you would lose (418.00) from holding Boise Cascad Llc or give up 4.81% of portfolio value over 90 days.

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

Boise Cascad Llc  vs.  West Fraser Timber

Boise Cascad Llc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boise Cascad Llc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Boise Cascad is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

West Fraser Timber

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Boise Cascad and West Fraser

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

The idea behind Boise Cascad Llc and West Fraser Timber 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.