Correlation Between Western Investment and Strategic Metals

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

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

Diversification Opportunities for Western Investment and Strategic Metals

0.42

Correlation Coefficient

Western Investment  Strategic Metals

Very weak diversification

The 3 months correlation between Western and Strategic is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Strategic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Metals 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 Strategic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Metals has no effect on the direction of Western Investment i.e., Western Investment and Strategic Metals go up and down completely randomly.

Pair Corralation between Western Investment and Strategic Metals

Given the investment horizon of 90 days Western Investment is expected to generate 4.26 times less return on investment than Strategic Metals. But when comparing it to its historical volatility, Western Investment is 1.87 times less risky than Strategic Metals. It trades about 0.04 of its potential returns per unit of risk. Strategic Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Strategic Metals on December 23, 2024 and sell it today you would earn a total of  4.00  from holding Strategic Metals or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Western Investment  vs.  Strategic Metals

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 unfluctuating basic indicators, Western Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Strategic Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Strategic Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and Strategic Metals

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

The idea behind Western Investment and Strategic Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.