Correlation Between Western Forest and AltaGas

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

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

Diversification Opportunities for Western Forest and AltaGas

0.1

Correlation Coefficient

Western Forest  AltaGas

Average diversification

The 3 months correlation between Western and AltaGas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Western Forest Products and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas and Western Forest 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 Western Forest Products are associated (or correlated) with AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Western Forest i.e., Western Forest and AltaGas go up and down completely randomly.

Pair Corralation between Western Forest and AltaGas

Assuming the 90 days trading horizon Western Forest is expected to generate 1.23 times less return on investment than AltaGas. In addition to that, Western Forest is 2.55 times more volatile than AltaGas. It trades about 0.04 of its total potential returns per unit of risk. AltaGas is currently generating about 0.14 per unit of volatility. If you would invest  3,842  in AltaGas on May 6, 2025 and sell it today you would earn a total of  286.00  from holding AltaGas or generate 7.44% return on investment over 90 days.

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

Western Forest Products  vs.  AltaGas

Western Forest Products

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Forest Products are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Western Forest is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

AltaGas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AltaGas may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Western Forest and AltaGas

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

The idea behind Western Forest Products and AltaGas 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.