Correlation Between Stewart Information and West Fraser

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

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

Diversification Opportunities for Stewart Information and West Fraser

-0.13

Correlation Coefficient

Stewart Information  West Fraser

Good diversification

The 3 months correlation between Stewart and West is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Information Services 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 Stewart Information 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 Stewart Information Services 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 Stewart Information i.e., Stewart Information and West Fraser go up and down completely randomly.

Pair Corralation between Stewart Information and West Fraser

Considering the 90-day investment horizon Stewart Information Services is expected to generate 1.26 times more return on investment than West Fraser. However, Stewart Information is 1.26 times more volatile than West Fraser Timber. It trades about 0.02 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  6,446  in Stewart Information Services on May 6, 2025 and sell it today you would earn a total of  114.00  from holding Stewart Information Services or generate 1.77% return on investment over 90 days.

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

Stewart Information Services  vs.  West Fraser Timber

Stewart Information

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stewart Information Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Stewart Information is not utilizing all of its potentials. The recent 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 Stewart Information and West Fraser

The main advantage of trading using opposite Stewart Information and West Fraser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stewart Information 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 Stewart Information Services 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 Stocks Directory module to find actively traded stocks across global markets.