Correlation Between WESTERN ENERGY and WESTERN NEW

Can any of the company-specific risk be diversified away by investing in both WESTERN ENERGY and WESTERN NEW 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 NEW 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 NEW ENGL, you can compare the effects of market volatilities on WESTERN ENERGY and WESTERN NEW 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 NEW. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTERN ENERGY and WESTERN NEW.

Diversification Opportunities for WESTERN ENERGY and WESTERN NEW

-0.03

Correlation Coefficient

WESTERN ENERGY  WESTERN NEW

Good diversification

The 3 months correlation between WESTERN and WESTERN is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN ENERGY SRV and WESTERN NEW ENGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN NEW ENGL 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 NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN NEW ENGL has no effect on the direction of WESTERN ENERGY i.e., WESTERN ENERGY and WESTERN NEW go up and down completely randomly.

Pair Corralation between WESTERN ENERGY and WESTERN NEW

Assuming the 90 days horizon WESTERN ENERGY SRV is expected to under-perform the WESTERN NEW. In addition to that, WESTERN ENERGY is 2.62 times more volatile than WESTERN NEW ENGL. It trades about -0.05 of its total potential returns per unit of risk. WESTERN NEW ENGL is currently generating about -0.03 per unit of volatility. If you would invest  864.00  in WESTERN NEW ENGL on December 22, 2024 and sell it today you would lose (29.00) from holding WESTERN NEW ENGL or give up 3.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

WESTERN ENERGY SRV  vs.  WESTERN NEW ENGL

WESTERN ENERGY SRV

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WESTERN NEW ENGL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with WESTERN ENERGY and WESTERN NEW

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

The idea behind WESTERN ENERGY SRV and WESTERN NEW ENGL 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.