Correlation Between Western Copper and Gamma Communications

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

By analyzing existing cross correlation between Western Copper and and Gamma Communications plc, you can compare the effects of market volatilities on Western Copper and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Gamma Communications.

Diversification Opportunities for Western Copper and Gamma Communications

0.38

Correlation Coefficient

Western Copper  Gamma Communications

Weak diversification

The 3 months correlation between Western and Gamma is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Copper and are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of Western Copper i.e., Western Copper and Gamma Communications go up and down completely randomly.

Pair Corralation between Western Copper and Gamma Communications

Assuming the 90 days trading horizon Western Copper and is expected to under-perform the Gamma Communications. In addition to that, Western Copper is 1.36 times more volatile than Gamma Communications plc. It trades about -0.01 of its total potential returns per unit of risk. Gamma Communications plc is currently generating about 0.05 per unit of volatility. If you would invest  1,242  in Gamma Communications plc on October 5, 2024 and sell it today you would earn a total of  608.00  from holding Gamma Communications plc or generate 48.95% return on investment over 90 days.

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

Western Copper and  vs.  Gamma Communications plc

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Western Copper and Gamma Communications

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

The idea behind Western Copper and and Gamma Communications plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.