Correlation Between IA Financial and Western Metallica

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

By analyzing existing cross correlation between iA Financial and Western Metallica Resources, you can compare the effects of market volatilities on IA Financial and Western Metallica 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 IA Financial with a short position of Western Metallica. Check out your portfolio center. Please also check ongoing floating volatility patterns of IA Financial and Western Metallica.

Diversification Opportunities for IA Financial and Western Metallica

0.13

Correlation Coefficient

IA Financial  Western Metallica

Average diversification

The 3 months correlation between IAG and Western is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and Western Metallica Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Metallica and IA 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 iA Financial are associated (or correlated) with Western Metallica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Metallica has no effect on the direction of IA Financial i.e., IA Financial and Western Metallica go up and down completely randomly.

Pair Corralation between IA Financial and Western Metallica

Assuming the 90 days trading horizon IA Financial is expected to generate 38.84 times less return on investment than Western Metallica. But when comparing it to its historical volatility, iA Financial is 7.57 times less risky than Western Metallica. It trades about 0.01 of its potential returns per unit of risk. Western Metallica Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Western Metallica Resources on December 20, 2024 and sell it today you would lose (0.50) from holding Western Metallica Resources or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

iA Financial  vs.  Western Metallica Resources

iA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days iA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IA Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Western Metallica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metallica Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Metallica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IA Financial and Western Metallica

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

The idea behind iA Financial and Western Metallica Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.