Correlation Between Western Investment and Orogen Royalties

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

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

Diversification Opportunities for Western Investment and Orogen Royalties

0.11

Correlation Coefficient

Western Investment  Orogen Royalties

Average diversification

The 3 months correlation between Western and Orogen is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Orogen Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orogen Royalties 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 Orogen Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orogen Royalties has no effect on the direction of Western Investment i.e., Western Investment and Orogen Royalties go up and down completely randomly.

Pair Corralation between Western Investment and Orogen Royalties

Given the investment horizon of 90 days Western Investment is expected to under-perform the Orogen Royalties. In addition to that, Western Investment is 1.25 times more volatile than Orogen Royalties. It trades about -0.01 of its total potential returns per unit of risk. Orogen Royalties is currently generating about 0.13 per unit of volatility. If you would invest  130.00  in Orogen Royalties on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Orogen Royalties or generate 18.46% return on investment over 90 days.

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

Western Investment  vs.  Orogen Royalties

Western Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Western Investment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Orogen Royalties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orogen Royalties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Orogen Royalties showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and Orogen Royalties

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

The idea behind Western Investment and Orogen Royalties 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.