Correlation Between Talon Metals and Western Investment

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

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

Diversification Opportunities for Talon Metals and Western Investment

-0.23

Correlation Coefficient

Talon Metals  Western Investment

Very good diversification

The 3 months correlation between Talon and Western is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Talon Metals 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 Talon Metals Corp 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 Talon Metals i.e., Talon Metals and Western Investment go up and down completely randomly.

Pair Corralation between Talon Metals and Western Investment

Assuming the 90 days trading horizon Talon Metals Corp is expected to generate 2.42 times more return on investment than Western Investment. However, Talon Metals is 2.42 times more volatile than Western Investment. It trades about 0.02 of its potential returns per unit of risk. Western Investment is currently generating about 0.02 per unit of risk. If you would invest  9.00  in Talon Metals Corp on December 26, 2024 and sell it today you would lose (0.50) from holding Talon Metals Corp or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Talon Metals Corp  vs.  Western Investment

Talon Metals Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talon Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Talon Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Western Investment is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Talon Metals and Western Investment

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

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.