Correlation Between Beaver Coal and Windrock Land

Can any of the company-specific risk be diversified away by investing in both Beaver Coal and Windrock Land 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 Beaver Coal and Windrock Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Beaver Coal and Windrock Land

0.08

Correlation Coefficient

Beaver Coal  Windrock Land

Significant diversification

The 3 months correlation between Beaver and Windrock is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Beaver Coal Co and Windrock Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Windrock Land and Beaver Coal 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 Beaver Coal Co are associated (or correlated) with Windrock Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Windrock Land has no effect on the direction of Beaver Coal i.e., Beaver Coal and Windrock Land go up and down completely randomly.

Pair Corralation between Beaver Coal and Windrock Land

Assuming the 90 days horizon Beaver Coal Co is expected to generate 0.85 times more return on investment than Windrock Land. However, Beaver Coal Co is 1.18 times less risky than Windrock Land. It trades about 0.06 of its potential returns per unit of risk. Windrock Land Co is currently generating about 0.05 per unit of risk. If you would invest  340,000  in Beaver Coal Co on December 29, 2024 and sell it today you would earn a total of  28,500  from holding Beaver Coal Co or generate 8.38% return on investment over 90 days.

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

Beaver Coal Co  vs.  Windrock Land Co

Beaver Coal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beaver Coal Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Beaver Coal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Windrock Land

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Windrock Land Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Windrock Land may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Beaver Coal and Windrock Land

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

The idea behind Beaver Coal Co and Windrock Land 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.