Correlation Between Western Acquisition and GENERAL

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

Diversification Opportunities for Western Acquisition and GENERAL

-0.19

Correlation Coefficient

Western Acquisition  GENERAL

Good diversification

The 3 months correlation between Western and GENERAL is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Western Acquisition i.e., Western Acquisition and GENERAL go up and down completely randomly.

Pair Corralation between Western Acquisition and GENERAL

Given the investment horizon of 90 days Western Acquisition Ventures is expected to under-perform the GENERAL. In addition to that, Western Acquisition is 2.99 times more volatile than GENERAL ELEC CAP. It trades about -0.14 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.04 per unit of volatility. If you would invest  10,121  in GENERAL ELEC CAP on October 26, 2024 and sell it today you would earn a total of  132.00  from holding GENERAL ELEC CAP or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.41%
Values	Daily Returns

Western Acquisition Ventures  vs.  GENERAL ELEC CAP

Western Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Acquisition Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GENERAL ELEC CAP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Acquisition and GENERAL

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

The idea behind Western Acquisition Ventures and GENERAL ELEC CAP 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.