First, we develop the history of the item relative to the market average.

To establish an item’s relative price, we statistically calculate the item’s estimated price based on the current price of the other items in its market. Then the estimated price of this item is subtracted from its actual price to establish its overvalued or undervalued condition or Relative Price.

There is one vertical bar for each week of the year. The high of the bar is the highest relative price observed during that week of the year in the period of time studied. The low of the bar is the lowest relative price observed during that week of the year in the period of time studied. The tick mark on the bar is the average relative price for that week over the period of time studied. All 52 bars together show us the history of this item’s price action relative to the market average.

When we compare a Southern Pine item to the Southern Pine market average, we usually use 10 years of past history, if it is available. When we compare items to Western SPF 2x4, the contract grade for hedging purposes, we use five years or more of past history. We feel at least five years of data is needed for meaningful analysis.