Correlation Between Northwest Copper and Chakana Copper

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

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

Diversification Opportunities for Northwest Copper and Chakana Copper

-0.41

Correlation Coefficient

Northwest Copper  Chakana Copper

Very good diversification

The 3 months correlation between Northwest and Chakana is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Copper Corp and Chakana Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chakana Copper Corp and Northwest Copper 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 Northwest Copper Corp are associated (or correlated) with Chakana Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chakana Copper Corp has no effect on the direction of Northwest Copper i.e., Northwest Copper and Chakana Copper go up and down completely randomly.

Pair Corralation between Northwest Copper and Chakana Copper

Assuming the 90 days trading horizon Northwest Copper Corp is expected to generate 1.32 times more return on investment than Chakana Copper. However, Northwest Copper is 1.32 times more volatile than Chakana Copper Corp. It trades about 0.22 of its potential returns per unit of risk. Chakana Copper Corp is currently generating about -0.13 per unit of risk. If you would invest  15.00  in Northwest Copper Corp on October 12, 2024 and sell it today you would earn a total of  8.00  from holding Northwest Copper Corp or generate 53.33% return on investment over 90 days.

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

Northwest Copper Corp  vs.  Chakana Copper Corp

Northwest Copper Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Copper Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Northwest Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Chakana Copper Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chakana Copper Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chakana Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northwest Copper and Chakana Copper

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

The idea behind Northwest Copper Corp and Chakana Copper 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .