Correlation Between Opus One and Western Investment

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

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

Diversification Opportunities for Opus One and Western Investment

-0.37

Correlation Coefficient

Opus One  Western Investment

Very good diversification

The 3 months correlation between Opus and Western is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Opus One Resources and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Opus One 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 Opus One Resources 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 Opus One i.e., Opus One and Western Investment go up and down completely randomly.

Pair Corralation between Opus One and Western Investment

Assuming the 90 days horizon Opus One Resources is expected to under-perform the Western Investment. In addition to that, Opus One is 1.38 times more volatile than Western Investment. It trades about -0.23 of its total potential returns per unit of risk. Western Investment is currently generating about 0.52 per unit of volatility. If you would invest  46.00  in Western Investment on October 9, 2024 and sell it today you would earn a total of  17.00  from holding Western Investment or generate 36.96% return on investment over 90 days.

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

Opus One Resources  vs.  Western Investment

Opus One Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Opus One Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Western Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opus One and Western Investment

The main advantage of trading using opposite Opus One and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opus One 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 Opus One Resources 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.