Correlation Between Compania and Western Alaska

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

By analyzing existing cross correlation between Compania de Minas and Western Alaska Minerals, you can compare the effects of market volatilities on Compania and Western Alaska 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 Compania with a short position of Western Alaska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Western Alaska.

Diversification Opportunities for Compania and Western Alaska

0.64

Correlation Coefficient

Compania  Western Alaska

Poor diversification

The 3 months correlation between Compania and Western is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Western Alaska Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alaska Minerals and Compania 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 Compania de Minas are associated (or correlated) with Western Alaska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alaska Minerals has no effect on the direction of Compania i.e., Compania and Western Alaska go up and down completely randomly.

Pair Corralation between Compania and Western Alaska

Considering the 90-day investment horizon Compania is expected to generate 1.96 times less return on investment than Western Alaska. But when comparing it to its historical volatility, Compania de Minas is 4.14 times less risky than Western Alaska. It trades about 0.22 of its potential returns per unit of risk. Western Alaska Minerals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Western Alaska Minerals on December 30, 2024 and sell it today you would earn a total of  12.00  from holding Western Alaska Minerals or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Compania de Minas  vs.  Western Alaska Minerals

Compania de Minas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Compania displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Alaska Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alaska Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Western Alaska reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Western Alaska

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

The idea behind Compania de Minas and Western Alaska Minerals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.