Correlation Between Western Metal and Glodon Software

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

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

Diversification Opportunities for Western Metal and Glodon Software

0.09

Correlation Coefficient

Western Metal  Glodon Software

Significant diversification

The 3 months correlation between Western and Glodon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Western Metal Materials and Glodon Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glodon Software and Western Metal 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 Metal Materials are associated (or correlated) with Glodon Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glodon Software has no effect on the direction of Western Metal i.e., Western Metal and Glodon Software go up and down completely randomly.

Pair Corralation between Western Metal and Glodon Software

Assuming the 90 days trading horizon Western Metal Materials is expected to generate 1.23 times more return on investment than Glodon Software. However, Western Metal is 1.23 times more volatile than Glodon Software Co. It trades about 0.08 of its potential returns per unit of risk. Glodon Software Co is currently generating about 0.02 per unit of risk. If you would invest  1,618  in Western Metal Materials on December 2, 2024 and sell it today you would earn a total of  226.00  from holding Western Metal Materials or generate 13.97% return on investment over 90 days.

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

Western Metal Materials  vs.  Glodon Software Co

Western Metal Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metal Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Glodon Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Glodon Software Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Glodon Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Metal and Glodon Software

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

The idea behind Western Metal Materials and Glodon Software Co 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.