Correlation Between WESTERN ENERGY and WESTERN COPPER

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

By analyzing existing cross correlation between WESTERN ENERGY SRV and WESTERN PER, you can compare the effects of market volatilities on WESTERN ENERGY and WESTERN 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 WESTERN ENERGY with a short position of WESTERN COPPER. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTERN ENERGY and WESTERN COPPER.

Diversification Opportunities for WESTERN ENERGY and WESTERN COPPER

0.39

Correlation Coefficient

WESTERN ENERGY  WESTERN COPPER

Weak diversification

The 3 months correlation between WESTERN and WESTERN is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN ENERGY SRV and WESTERN PER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN COPPER and WESTERN ENERGY 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 WESTERN ENERGY SRV are associated (or correlated) with WESTERN COPPER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN COPPER has no effect on the direction of WESTERN ENERGY i.e., WESTERN ENERGY and WESTERN COPPER go up and down completely randomly.

Pair Corralation between WESTERN ENERGY and WESTERN COPPER

Assuming the 90 days horizon WESTERN ENERGY SRV is expected to generate 1.18 times more return on investment than WESTERN COPPER. However, WESTERN ENERGY is 1.18 times more volatile than WESTERN PER. It trades about 0.2 of its potential returns per unit of risk. WESTERN PER is currently generating about 0.04 per unit of risk. If you would invest  167.00  in WESTERN ENERGY SRV on October 8, 2024 and sell it today you would earn a total of  12.00  from holding WESTERN ENERGY SRV or generate 7.19% return on investment over 90 days.

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

WESTERN ENERGY SRV  vs.  WESTERN PER

WESTERN ENERGY SRV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN ENERGY SRV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WESTERN ENERGY is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

WESTERN COPPER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN PER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WESTERN COPPER is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WESTERN ENERGY and WESTERN COPPER

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

The idea behind WESTERN ENERGY SRV and WESTERN PER 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.