Correlation Between WESTERN COPPER and WESTERN ENERGY

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

Diversification Opportunities for WESTERN COPPER and WESTERN ENERGY

0.39

Correlation Coefficient

WESTERN COPPER  WESTERN ENERGY

Weak diversification

The 3 months correlation between WESTERN and WESTERN is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN PER and WESTERN ENERGY SRV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN ENERGY SRV 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 WESTERN ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN ENERGY SRV has no effect on the direction of WESTERN COPPER i.e., WESTERN COPPER and WESTERN ENERGY go up and down completely randomly.

Pair Corralation between WESTERN COPPER and WESTERN ENERGY

Assuming the 90 days trading horizon WESTERN COPPER is expected to generate 5.86 times less return on investment than WESTERN ENERGY. But when comparing it to its historical volatility, WESTERN PER is 1.18 times less risky than WESTERN ENERGY. It trades about 0.04 of its potential returns per unit of risk. WESTERN ENERGY SRV is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  167.00  in WESTERN ENERGY SRV on October 8, 2024 and sell it today you would earn a total of  12.00  from holding WESTERN ENERGY SRV or generate 7.19% return on investment over 90 days.

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

WESTERN PER  vs.  WESTERN ENERGY SRV

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 comparatively stable basic indicators, WESTERN COPPER is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WESTERN ENERGY SRV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN ENERGY SRV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WESTERN ENERGY is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WESTERN COPPER and WESTERN ENERGY

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

The idea behind WESTERN PER and WESTERN ENERGY SRV 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.