Correlation Between Orogen Royalties and Western Investment

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

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

Diversification Opportunities for Orogen Royalties and Western Investment

0.11

Correlation Coefficient

Orogen Royalties  Western Investment

Average diversification

The 3 months correlation between Orogen and Western is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Orogen Royalties and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Orogen Royalties 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 Orogen Royalties are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Orogen Royalties i.e., Orogen Royalties and Western Investment go up and down completely randomly.

Pair Corralation between Orogen Royalties and Western Investment

Assuming the 90 days horizon Orogen Royalties is expected to generate 0.8 times more return on investment than Western Investment. However, Orogen Royalties is 1.25 times less risky than Western Investment. It trades about 0.13 of its potential returns per unit of risk. Western Investment is currently generating about -0.01 per unit of risk. If you would invest  130.00  in Orogen Royalties on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Orogen Royalties or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Orogen Royalties  vs.  Western Investment

Orogen Royalties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orogen Royalties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Orogen Royalties showed solid returns over the last few months and may actually be approaching a breakup point.

Western Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Western Investment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Orogen Royalties and Western Investment

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

The idea behind Orogen Royalties and Western Investment 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.