Correlation Between Western Investment and Discovery Silver

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

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

Diversification Opportunities for Western Investment and Discovery Silver

0.38

Correlation Coefficient

Western Investment  Discovery Silver

Weak diversification

The 3 months correlation between Western and Discovery is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Discovery Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Silver Corp and Western Investment 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 Investment are associated (or correlated) with Discovery Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Silver Corp has no effect on the direction of Western Investment i.e., Western Investment and Discovery Silver go up and down completely randomly.

Pair Corralation between Western Investment and Discovery Silver

Given the investment horizon of 90 days Western Investment is expected to generate 14.55 times less return on investment than Discovery Silver. But when comparing it to its historical volatility, Western Investment is 1.99 times less risky than Discovery Silver. It trades about 0.05 of its potential returns per unit of risk. Discovery Silver Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Discovery Silver Corp on December 22, 2024 and sell it today you would earn a total of  134.00  from holding Discovery Silver Corp or generate 191.43% return on investment over 90 days.

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

Western Investment  vs.  Discovery Silver Corp

Western Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Discovery Silver Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Silver Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Discovery Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and Discovery Silver

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

The idea behind Western Investment and Discovery Silver Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.