Correlation Between Western Investment and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both Western Investment and Diamond Estates 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 Diamond Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Investment and Diamond Estates Wines, you can compare the effects of market volatilities on Western Investment and Diamond Estates 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 Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Investment and Diamond Estates.
Diversification Opportunities for Western Investment and Diamond Estates
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Diamond is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Western Investment i.e., Western Investment and Diamond Estates go up and down completely randomly.
Pair Corralation between Western Investment and Diamond Estates
Given the investment horizon of 90 days Western Investment is expected to generate 0.94 times more return on investment than Diamond Estates. However, Western Investment is 1.06 times less risky than Diamond Estates. It trades about 0.31 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.06 per unit of risk. If you would invest 40.00 in Western Investment on September 24, 2024 and sell it today you would earn a total of 13.00 from holding Western Investment or generate 32.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Western Investment vs. Diamond Estates Wines
Performance |
Timeline |
Western Investment |
Diamond Estates Wines |
Western Investment and Diamond Estates Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Investment and Diamond Estates
The main advantage of trading using opposite Western Investment and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Investment position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.Western Investment vs. Maple Leaf Foods | Western Investment vs. Canlan Ice Sports | Western Investment vs. HPQ Silicon Resources | Western Investment vs. Slate Grocery REIT |
Diamond Estates vs. Western Investment | Diamond Estates vs. Canadian General Investments | Diamond Estates vs. North American Financial | Diamond Estates vs. Cogeco Communications |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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