Correlation Between Western Investment and Mammoth Resources

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

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

Diversification Opportunities for Western Investment and Mammoth Resources

-0.77

Correlation Coefficient

Western Investment  Mammoth Resources

Pay attention - limited upside

The 3 months correlation between Western and Mammoth is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Mammoth Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mammoth Resources 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 Mammoth Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mammoth Resources Corp has no effect on the direction of Western Investment i.e., Western Investment and Mammoth Resources go up and down completely randomly.

Pair Corralation between Western Investment and Mammoth Resources

Given the investment horizon of 90 days Western Investment is expected to generate 0.28 times more return on investment than Mammoth Resources. However, Western Investment is 3.55 times less risky than Mammoth Resources. It trades about 0.18 of its potential returns per unit of risk. Mammoth Resources Corp is currently generating about -0.09 per unit of risk. If you would invest  42.00  in Western Investment on October 24, 2024 and sell it today you would earn a total of  17.00  from holding Western Investment or generate 40.48% return on investment over 90 days.

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

Western Investment  vs.  Mammoth Resources Corp

Western Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 13 (%) 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.

Mammoth Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mammoth Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Western Investment and Mammoth Resources

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

The idea behind Western Investment and Mammoth Resources 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.