Correlation Between Western Copper and BII Railway

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

Diversification Opportunities for Western Copper and BII Railway

0.2

Correlation Coefficient

Western Copper  BII Railway

Modest diversification

The 3 months correlation between Western and BII is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor 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 BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Western Copper i.e., Western Copper and BII Railway go up and down completely randomly.

Pair Corralation between Western Copper and BII Railway

Assuming the 90 days trading horizon Western Copper and is expected to generate 0.96 times more return on investment than BII Railway. However, Western Copper and is 1.04 times less risky than BII Railway. It trades about -0.02 of its potential returns per unit of risk. BII Railway Transportation is currently generating about -0.02 per unit of risk. If you would invest  106.00  in Western Copper and on September 24, 2024 and sell it today you would lose (11.00) from holding Western Copper and or give up 10.38% of portfolio value over 90 days.

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

Western Copper and  vs.  BII Railway Transportation

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BII Railway Transpor

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Copper and BII Railway

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

The idea behind Western Copper and and BII Railway Transportation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.