Correlation Between Wilmington Capital and Western Investment

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

By analyzing existing cross correlation between Wilmington Capital Management and Western Investment, you can compare the effects of market volatilities on Wilmington Capital and Western Investment 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 Wilmington Capital with a short position of Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Capital and Western Investment.

Diversification Opportunities for Wilmington Capital and Western Investment

-0.71

Correlation Coefficient

Wilmington Capital  Western Investment

Pay attention - limited upside

The 3 months correlation between Wilmington and Western is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Capital Management and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Wilmington Capital 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 Wilmington Capital Management are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Wilmington Capital i.e., Wilmington Capital and Western Investment go up and down completely randomly.

Pair Corralation between Wilmington Capital and Western Investment

Assuming the 90 days trading horizon Wilmington Capital is expected to generate 2.05 times less return on investment than Western Investment. But when comparing it to its historical volatility, Wilmington Capital Management is 1.05 times less risky than Western Investment. It trades about 0.02 of its potential returns per unit of risk. Western Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Western Investment on October 26, 2024 and sell it today you would earn a total of  21.00  from holding Western Investment or generate 53.85% return on investment over 90 days.

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

Wilmington Capital Management  vs.  Western Investment

Wilmington Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmington Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Western Investment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wilmington Capital and Western Investment

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

The idea behind Wilmington Capital Management and Western Investment 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.