Correlation Between Western Acquisition and Cool

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Can any of the company-specific risk be diversified away by investing in both Western Acquisition and Cool 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 Acquisition and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Acquisition Ventures and Cool Company, you can compare the effects of market volatilities on Western Acquisition and Cool 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 Acquisition with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and Cool.

Diversification Opportunities for Western Acquisition and Cool

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Western and Cool is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and Western Acquisition 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 Acquisition Ventures are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Western Acquisition i.e., Western Acquisition and Cool go up and down completely randomly.

Pair Corralation between Western Acquisition and Cool

Given the investment horizon of 90 days Western Acquisition is expected to generate 13.48 times less return on investment than Cool. But when comparing it to its historical volatility, Western Acquisition Ventures is 2.59 times less risky than Cool. It trades about 0.04 of its potential returns per unit of risk. Cool Company is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  759.00  in Cool Company on October 6, 2024 and sell it today you would earn a total of  73.00  from holding Cool Company or generate 9.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Western Acquisition Ventures  vs.  Cool Company

 Performance 
       Timeline  
Western Acquisition 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Cool Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Western Acquisition and Cool Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Western Acquisition and Cool

The main advantage of trading using opposite Western Acquisition and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.
The idea behind Western Acquisition Ventures and Cool Company 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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