Correlation Between Pekin Life and Western Sierra

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

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

Diversification Opportunities for Pekin Life and Western Sierra

-0.38

Correlation Coefficient

Pekin Life  Western Sierra

Very good diversification

The 3 months correlation between Pekin and Western is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining and Pekin Life 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 Pekin Life Insurance are associated (or correlated) with Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Pekin Life i.e., Pekin Life and Western Sierra go up and down completely randomly.

Pair Corralation between Pekin Life and Western Sierra

Given the investment horizon of 90 days Pekin Life Insurance is expected to generate 0.21 times more return on investment than Western Sierra. However, Pekin Life Insurance is 4.86 times less risky than Western Sierra. It trades about 0.13 of its potential returns per unit of risk. Western Sierra Mining is currently generating about -0.17 per unit of risk. If you would invest  1,151  in Pekin Life Insurance on September 2, 2024 and sell it today you would earn a total of  24.00  from holding Pekin Life Insurance or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Pekin Life Insurance  vs.  Western Sierra Mining

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Western Sierra Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Sierra Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pekin Life and Western Sierra

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

The idea behind Pekin Life Insurance and Western Sierra Mining 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.