Correlation Between MOUNT GIBSON and WESTERN NEW

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

By analyzing existing cross correlation between MOUNT GIBSON IRON and WESTERN NEW ENGL, you can compare the effects of market volatilities on MOUNT GIBSON and WESTERN NEW 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 MOUNT GIBSON with a short position of WESTERN NEW. Check out your portfolio center. Please also check ongoing floating volatility patterns of MOUNT GIBSON and WESTERN NEW.

Diversification Opportunities for MOUNT GIBSON and WESTERN NEW

-0.3

Correlation Coefficient

MOUNT GIBSON  WESTERN NEW

Very good diversification

The 3 months correlation between MOUNT and WESTERN is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding MOUNT GIBSON IRON and WESTERN NEW ENGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN NEW ENGL and MOUNT GIBSON 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 MOUNT GIBSON IRON are associated (or correlated) with WESTERN NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN NEW ENGL has no effect on the direction of MOUNT GIBSON i.e., MOUNT GIBSON and WESTERN NEW go up and down completely randomly.

Pair Corralation between MOUNT GIBSON and WESTERN NEW

Assuming the 90 days trading horizon MOUNT GIBSON is expected to generate 5.13 times less return on investment than WESTERN NEW. In addition to that, MOUNT GIBSON is 1.92 times more volatile than WESTERN NEW ENGL. It trades about 0.01 of its total potential returns per unit of risk. WESTERN NEW ENGL is currently generating about 0.13 per unit of volatility. If you would invest  778.00  in WESTERN NEW ENGL on October 24, 2024 and sell it today you would earn a total of  87.00  from holding WESTERN NEW ENGL or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

MOUNT GIBSON IRON  vs.  WESTERN NEW ENGL

MOUNT GIBSON IRON

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOUNT GIBSON IRON are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MOUNT GIBSON is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WESTERN NEW ENGL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN NEW ENGL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WESTERN NEW may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MOUNT GIBSON and WESTERN NEW

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

The idea behind MOUNT GIBSON IRON and WESTERN NEW ENGL 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.