Correlation Between Covalon Technologies and Westaim Corp

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

By analyzing existing cross correlation between Covalon Technologies and Westaim Corp, you can compare the effects of market volatilities on Covalon Technologies and Westaim Corp 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 Covalon Technologies with a short position of Westaim Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covalon Technologies and Westaim Corp.

Diversification Opportunities for Covalon Technologies and Westaim Corp

-0.27

Correlation Coefficient

Covalon Technologies  Westaim Corp

Very good diversification

The 3 months correlation between Covalon and Westaim is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Covalon Technologies and Westaim Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westaim Corp and Covalon Technologies 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 Covalon Technologies are associated (or correlated) with Westaim Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westaim Corp has no effect on the direction of Covalon Technologies i.e., Covalon Technologies and Westaim Corp go up and down completely randomly.

Pair Corralation between Covalon Technologies and Westaim Corp

Assuming the 90 days horizon Covalon Technologies is expected to under-perform the Westaim Corp. In addition to that, Covalon Technologies is 2.28 times more volatile than Westaim Corp. It trades about -0.13 of its total potential returns per unit of risk. Westaim Corp is currently generating about 0.02 per unit of volatility. If you would invest  3,138  in Westaim Corp on December 30, 2024 and sell it today you would earn a total of  37.00  from holding Westaim Corp or generate 1.18% return on investment over 90 days.

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

Covalon Technologies  vs.  Westaim Corp

Covalon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Westaim Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westaim Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Westaim Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Covalon Technologies and Westaim Corp

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

The idea behind Covalon Technologies and Westaim Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.