Correlation Between Western Mining and Heren Health

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

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

Diversification Opportunities for Western Mining and Heren Health

0.25

Correlation Coefficient

Western Mining  Heren Health

Modest diversification

The 3 months correlation between Western and Heren is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Western Mining Co and Heren Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heren Health and Western Mining 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 Mining Co are associated (or correlated) with Heren Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heren Health has no effect on the direction of Western Mining i.e., Western Mining and Heren Health go up and down completely randomly.

Pair Corralation between Western Mining and Heren Health

Assuming the 90 days trading horizon Western Mining Co is expected to under-perform the Heren Health. But the stock apears to be less risky and, when comparing its historical volatility, Western Mining Co is 1.94 times less risky than Heren Health. The stock trades about -0.08 of its potential returns per unit of risk. The Heren Health Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,417  in Heren Health Co on September 29, 2024 and sell it today you would earn a total of  115.00  from holding Heren Health Co or generate 8.12% return on investment over 90 days.

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

Western Mining Co  vs.  Heren Health Co

Western Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Heren Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heren Health Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heren Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Mining and Heren Health

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

The idea behind Western Mining Co and Heren Health 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.