Correlation Between Interfor and West Fraser

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

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

Diversification Opportunities for Interfor and West Fraser

0.84

Correlation Coefficient

Interfor  West Fraser

Very poor diversification

The 3 months correlation between Interfor and West is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Interfor 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 Interfor 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 Interfor 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 Interfor i.e., Interfor and West Fraser go up and down completely randomly.

Pair Corralation between Interfor and West Fraser

Assuming the 90 days horizon Interfor is expected to under-perform the West Fraser. But the pink sheet apears to be less risky and, when comparing its historical volatility, Interfor is 1.01 times less risky than West Fraser. The pink sheet trades about -0.56 of its potential returns per unit of risk. The West Fraser Timber is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  9,532  in West Fraser Timber on August 3, 2025 and sell it today you would lose (972.00) from holding West Fraser Timber or give up 10.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Interfor  vs.  West Fraser Timber

Interfor

Risk-Adjusted Performance

Weakest

Over the last 90 days Interfor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

West Fraser Timber

Risk-Adjusted Performance

Weakest

Over the last 90 days West Fraser Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Interfor and West Fraser

The main advantage of trading using opposite Interfor and West Fraser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interfor 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 Interfor 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.