Correlation Between Western Investment and Yerbae Brands

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

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

Diversification Opportunities for Western Investment and Yerbae Brands

-0.3

Correlation Coefficient

Western Investment  Yerbae Brands

Very good diversification

The 3 months correlation between Western and Yerbae is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Yerbae Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yerbae Brands 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 Yerbae Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yerbae Brands Corp has no effect on the direction of Western Investment i.e., Western Investment and Yerbae Brands go up and down completely randomly.

Pair Corralation between Western Investment and Yerbae Brands

Given the investment horizon of 90 days Western Investment is expected to generate 0.33 times more return on investment than Yerbae Brands. However, Western Investment is 3.03 times less risky than Yerbae Brands. It trades about 0.31 of its potential returns per unit of risk. Yerbae Brands Corp is currently generating about 0.06 per unit of risk. If you would invest  41.00  in Western Investment on October 7, 2024 and sell it today you would earn a total of  24.00  from holding Western Investment or generate 58.54% 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.  Yerbae Brands Corp

Western Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Yerbae Brands Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yerbae Brands Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Yerbae Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and Yerbae Brands

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

The idea behind Western Investment and Yerbae Brands 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.