Correlation Between Newport Exploration and Western Resources

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

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

Diversification Opportunities for Newport Exploration and Western Resources

-0.01

Correlation Coefficient

Newport Exploration  Western Resources

Good diversification

The 3 months correlation between Newport and Western is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Newport Exploration and Western Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Resources Corp and Newport Exploration 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 Newport Exploration are associated (or correlated) with Western Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Resources Corp has no effect on the direction of Newport Exploration i.e., Newport Exploration and Western Resources go up and down completely randomly.

Pair Corralation between Newport Exploration and Western Resources

Assuming the 90 days horizon Newport Exploration is expected to under-perform the Western Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Newport Exploration is 1.44 times less risky than Western Resources. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Western Resources Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.23  in Western Resources Corp on December 29, 2024 and sell it today you would earn a total of  0.30  from holding Western Resources Corp or generate 13.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Newport Exploration  vs.  Western Resources Corp

Newport Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newport Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Newport Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Resources Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Resources Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Western Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newport Exploration and Western Resources

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

The idea behind Newport Exploration and Western Resources 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.