Correlation Between Western Forest and CCL Industries

Can any of the company-specific risk be diversified away by investing in both Western Forest and CCL Industries 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 CCL Industries 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 CCL Industries, you can compare the effects of market volatilities on Western Forest and CCL Industries 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 CCL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Forest and CCL Industries.

Diversification Opportunities for Western Forest and CCL Industries

0.01

Correlation Coefficient

Western Forest  CCL Industries

Significant diversification

The 3 months correlation between Western and CCL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Forest Products and CCL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Industries 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 CCL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Industries has no effect on the direction of Western Forest i.e., Western Forest and CCL Industries go up and down completely randomly.

Pair Corralation between Western Forest and CCL Industries

Assuming the 90 days horizon Western Forest Products is expected to generate 103.4 times more return on investment than CCL Industries. However, Western Forest is 103.4 times more volatile than CCL Industries. It trades about 0.13 of its potential returns per unit of risk. CCL Industries is currently generating about 0.11 per unit of risk. If you would invest  28.00  in Western Forest Products on May 4, 2025 and sell it today you would earn a total of  928.00  from holding Western Forest Products or generate 3314.29% 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.  CCL Industries

Western Forest Products

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Forest Products are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Western Forest reported solid returns over the last few months and may actually be approaching a breakup point.

CCL Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CCL Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, CCL Industries may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Western Forest and CCL Industries

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

The idea behind Western Forest Products and CCL Industries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.