Correlation Between US Financial and Wallbridge Mining

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Can any of the company-specific risk be diversified away by investing in both US Financial and Wallbridge Mining 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 US Financial and Wallbridge Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Financial 15 and Wallbridge Mining, you can compare the effects of market volatilities on US Financial and Wallbridge Mining 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 US Financial with a short position of Wallbridge Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Wallbridge Mining.

Diversification Opportunities for US Financial and Wallbridge Mining

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between FTU and Wallbridge is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and Wallbridge Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wallbridge Mining and US Financial 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 US Financial 15 are associated (or correlated) with Wallbridge Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wallbridge Mining has no effect on the direction of US Financial i.e., US Financial and Wallbridge Mining go up and down completely randomly.

Pair Corralation between US Financial and Wallbridge Mining

Assuming the 90 days trading horizon US Financial 15 is expected to generate 0.98 times more return on investment than Wallbridge Mining. However, US Financial 15 is 1.02 times less risky than Wallbridge Mining. It trades about 0.04 of its potential returns per unit of risk. Wallbridge Mining is currently generating about 0.0 per unit of risk. If you would invest  36.00  in US Financial 15 on October 4, 2024 and sell it today you would earn a total of  12.00  from holding US Financial 15 or generate 33.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

US Financial 15  vs.  Wallbridge Mining

 Performance 
       Timeline  
US Financial 15 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, US Financial displayed solid returns over the last few months and may actually be approaching a breakup point.
Wallbridge Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wallbridge Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wallbridge Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

US Financial and Wallbridge Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with US Financial and Wallbridge Mining

The main advantage of trading using opposite US Financial and Wallbridge Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial position performs unexpectedly, Wallbridge Mining 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 Wallbridge Mining will offset losses from the drop in Wallbridge Mining's long position.
The idea behind US Financial 15 and Wallbridge Mining 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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