Correlation Between WESTERN COPPER and Clean Energy

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

By analyzing existing cross correlation between WESTERN PER and Clean Energy Fuels, you can compare the effects of market volatilities on WESTERN COPPER and Clean Energy 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 COPPER with a short position of Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTERN COPPER and Clean Energy.

Diversification Opportunities for WESTERN COPPER and Clean Energy

0.23

Correlation Coefficient

WESTERN COPPER  Clean Energy

Modest diversification

The 3 months correlation between WESTERN and Clean is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN PER and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels and WESTERN COPPER 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 PER are associated (or correlated) with Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of WESTERN COPPER i.e., WESTERN COPPER and Clean Energy go up and down completely randomly.

Pair Corralation between WESTERN COPPER and Clean Energy

Assuming the 90 days trading horizon WESTERN PER is expected to under-perform the Clean Energy. But the stock apears to be less risky and, when comparing its historical volatility, WESTERN PER is 1.36 times less risky than Clean Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Clean Energy Fuels is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  509.00  in Clean Energy Fuels on October 12, 2024 and sell it today you would lose (228.00) from holding Clean Energy Fuels or give up 44.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

WESTERN PER  vs.  Clean Energy Fuels

WESTERN COPPER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN PER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WESTERN COPPER is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Clean Energy Fuels

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with WESTERN COPPER and Clean Energy

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

The idea behind WESTERN PER and Clean Energy Fuels 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.