Correlation Between Procyon and West Island

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

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

Diversification Opportunities for Procyon and West Island

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Correlation Coefficient

Procyon  West Island

Pay attention - limited upside

The 3 months correlation between Procyon and West is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Procyon and West Island Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Island Brands and Procyon 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 Procyon are associated (or correlated) with West Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Island Brands has no effect on the direction of Procyon i.e., Procyon and West Island go up and down completely randomly.

Pair Corralation between Procyon and West Island

Given the investment horizon of 90 days Procyon is expected to generate 65.65 times less return on investment than West Island. But when comparing it to its historical volatility, Procyon is 14.85 times less risky than West Island. It trades about 0.02 of its potential returns per unit of risk. West Island Brands is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10.00  in West Island Brands on October 7, 2024 and sell it today you would lose (9.65) from holding West Island Brands or give up 96.5% of portfolio value over 90 days.

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

Procyon  vs.  West Island Brands

Procyon

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Procyon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

West Island Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Procyon and West Island

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

The idea behind Procyon and West Island Brands 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.