Correlation Between Seven West and Bannerman Resources

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

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

Diversification Opportunities for Seven West and Bannerman Resources

0.17

Correlation Coefficient

Seven West  Bannerman Resources

Average diversification

The 3 months correlation between Seven and Bannerman is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Bannerman Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and Seven West 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 Seven West Media are associated (or correlated) with Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Seven West i.e., Seven West and Bannerman Resources go up and down completely randomly.

Pair Corralation between Seven West and Bannerman Resources

Assuming the 90 days trading horizon Seven West Media is expected to generate 1.06 times more return on investment than Bannerman Resources. However, Seven West is 1.06 times more volatile than Bannerman Resources. It trades about 0.04 of its potential returns per unit of risk. Bannerman Resources is currently generating about -0.02 per unit of risk. If you would invest  15.00  in Seven West Media on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Seven West Media or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Seven West Media  vs.  Bannerman Resources

Seven West Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seven West Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Seven West unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bannerman Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bannerman Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Seven West and Bannerman Resources

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

The idea behind Seven West Media and Bannerman Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.