Correlation Between Chakana Copper and Northwest Copper

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

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

Diversification Opportunities for Chakana Copper and Northwest Copper

-0.48

Correlation Coefficient

Chakana Copper  Northwest Copper

Very good diversification

The 3 months correlation between Chakana and Northwest is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chakana Copper Corp and Northwest Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Copper Corp and Chakana 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 Chakana Copper Corp are associated (or correlated) with Northwest Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Copper Corp has no effect on the direction of Chakana Copper i.e., Chakana Copper and Northwest Copper go up and down completely randomly.

Pair Corralation between Chakana Copper and Northwest Copper

Assuming the 90 days trading horizon Chakana Copper is expected to generate 3.55 times less return on investment than Northwest Copper. In addition to that, Chakana Copper is 1.23 times more volatile than Northwest Copper Corp. It trades about 0.01 of its total potential returns per unit of risk. Northwest Copper Corp is currently generating about 0.03 per unit of volatility. If you would invest  24.00  in Northwest Copper Corp on October 27, 2024 and sell it today you would lose (3.00) from holding Northwest Copper Corp or give up 12.5% of portfolio value over 90 days.

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

Chakana Copper Corp  vs.  Northwest Copper Corp

Chakana Copper Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chakana Copper Corp are ranked lower than 2 (%) 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.

Northwest Copper Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Copper Corp are ranked lower than 5 (%) 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.

Pair Trading with Chakana Copper and Northwest Copper

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

The idea behind Chakana Copper Corp and Northwest 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.