Correlation Between Western Alaska and Sierra Madre

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

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

Diversification Opportunities for Western Alaska and Sierra Madre

0.66

Correlation Coefficient

Western Alaska  Sierra Madre

Poor diversification

The 3 months correlation between Western and Sierra is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Alaska Minerals and Sierra Madre Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Madre Gold and Western Alaska 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 Alaska Minerals are associated (or correlated) with Sierra Madre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Madre Gold has no effect on the direction of Western Alaska i.e., Western Alaska and Sierra Madre go up and down completely randomly.

Pair Corralation between Western Alaska and Sierra Madre

Assuming the 90 days horizon Western Alaska Minerals is expected to generate 1.49 times more return on investment than Sierra Madre. However, Western Alaska is 1.49 times more volatile than Sierra Madre Gold. It trades about 0.1 of its potential returns per unit of risk. Sierra Madre Gold is currently generating about 0.09 per unit of risk. If you would invest  30.00  in Western Alaska Minerals on December 30, 2024 and sell it today you would earn a total of  12.00  from holding Western Alaska Minerals or generate 40.0% return on investment over 90 days.

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

Western Alaska Minerals  vs.  Sierra Madre Gold

Western Alaska Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alaska Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Western Alaska reported solid returns over the last few months and may actually be approaching a breakup point.

Sierra Madre Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Madre Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sierra Madre reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Alaska and Sierra Madre

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

The idea behind Western Alaska Minerals and Sierra Madre Gold 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.