Correlation Between Circuit Fabology and Western Metal

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

By analyzing existing cross correlation between Circuit Fabology Microelectronics and Western Metal Materials, you can compare the effects of market volatilities on Circuit Fabology and Western Metal 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 Circuit Fabology with a short position of Western Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Circuit Fabology and Western Metal.

Diversification Opportunities for Circuit Fabology and Western Metal

0.68

Correlation Coefficient

Circuit Fabology  Western Metal

Poor diversification

The 3 months correlation between Circuit and Western is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Circuit Fabology Microelectron and Western Metal Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Metal Materials and Circuit Fabology 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 Circuit Fabology Microelectronics are associated (or correlated) with Western Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Metal Materials has no effect on the direction of Circuit Fabology i.e., Circuit Fabology and Western Metal go up and down completely randomly.

Pair Corralation between Circuit Fabology and Western Metal

Assuming the 90 days trading horizon Circuit Fabology Microelectronics is expected to under-perform the Western Metal. But the stock apears to be less risky and, when comparing its historical volatility, Circuit Fabology Microelectronics is 1.4 times less risky than Western Metal. The stock trades about -0.06 of its potential returns per unit of risk. The Western Metal Materials is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,643  in Western Metal Materials on September 28, 2024 and sell it today you would earn a total of  157.00  from holding Western Metal Materials or generate 9.56% return on investment over 90 days.

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

Circuit Fabology Microelectron  vs.  Western Metal Materials

Circuit Fabology Mic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Circuit Fabology Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Circuit Fabology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Metal Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metal Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Circuit Fabology and Western Metal

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

The idea behind Circuit Fabology Microelectronics and Western Metal Materials 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.