Correlation Between Mattel and Western Sierra

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

By analyzing existing cross correlation between Mattel Inc and Western Sierra Mining, you can compare the effects of market volatilities on Mattel and Western Sierra 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 Mattel with a short position of Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mattel and Western Sierra.

Diversification Opportunities for Mattel and Western Sierra

-0.58

Correlation Coefficient

Mattel  Western Sierra

Excellent diversification

The 3 months correlation between Mattel and Western is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining and Mattel 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 Mattel Inc are associated (or correlated) with Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Mattel i.e., Mattel and Western Sierra go up and down completely randomly.

Pair Corralation between Mattel and Western Sierra

Considering the 90-day investment horizon Mattel is expected to generate 82.62 times less return on investment than Western Sierra. But when comparing it to its historical volatility, Mattel Inc is 51.95 times less risky than Western Sierra. It trades about 0.07 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Western Sierra Mining on December 28, 2024 and sell it today you would lose (0.33) from holding Western Sierra Mining or give up 94.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Mattel Inc  vs.  Western Sierra Mining

Mattel Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mattel Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Mattel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Sierra Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Sierra Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Western Sierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mattel and Western Sierra

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

The idea behind Mattel Inc and Western Sierra 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.