Correlation Between UL Solutions and Western Sierra

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

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

Diversification Opportunities for UL Solutions and Western Sierra

-0.01

Correlation Coefficient

UL Solutions  Western Sierra

Good diversification

The 3 months correlation between ULS and Western is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding UL Solutions 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 UL Solutions 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 UL Solutions 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 UL Solutions i.e., UL Solutions and Western Sierra go up and down completely randomly.

Pair Corralation between UL Solutions and Western Sierra

Considering the 90-day investment horizon UL Solutions is expected to generate 90.26 times less return on investment than Western Sierra. But when comparing it to its historical volatility, UL Solutions is 83.48 times less risky than Western Sierra. It trades about 0.1 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Western Sierra Mining on December 27, 2024 and sell it today you would lose (0.33) from holding Western Sierra Mining or give up 94.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

UL Solutions  vs.  Western Sierra Mining

UL Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UL Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, UL Solutions may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Sierra Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Sierra Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Western Sierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UL Solutions and Western Sierra

The main advantage of trading using opposite UL Solutions and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UL Solutions 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 UL Solutions 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.