Correlation Between WGRT and POCC

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

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

Diversification Opportunities for WGRT and POCC

-0.21

Correlation Coefficient

WGRT  POCC

Very good diversification

The 3 months correlation between WGRT and POCC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding WGRT and POCC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POCC and WGRT 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 WGRT are associated (or correlated) with POCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POCC has no effect on the direction of WGRT i.e., WGRT and POCC go up and down completely randomly.

Pair Corralation between WGRT and POCC

Assuming the 90 days trading horizon WGRT is expected to generate 2.28 times more return on investment than POCC. However, WGRT is 2.28 times more volatile than POCC. It trades about 0.09 of its potential returns per unit of risk. POCC is currently generating about -0.12 per unit of risk. If you would invest  0.06  in WGRT on November 27, 2024 and sell it today you would earn a total of  0.02  from holding WGRT or generate 30.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

WGRT  vs.  POCC

WGRT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WGRT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, WGRT exhibited solid returns over the last few months and may actually be approaching a breakup point.

POCC

Risk-Adjusted Performance

Very Weak

Over the last 90 days POCC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for POCC shareholders.

Pair Trading with WGRT and POCC

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

The idea behind WGRT and POCC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.