Correlation Between Wallbridge Mining and East Africa

Can any of the company-specific risk be diversified away by investing in both Wallbridge Mining and East Africa 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 Wallbridge Mining and East Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wallbridge Mining and East Africa Metals, you can compare the effects of market volatilities on Wallbridge Mining and East Africa 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 Wallbridge Mining with a short position of East Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wallbridge Mining and East Africa.

Diversification Opportunities for Wallbridge Mining and East Africa

0.21

Correlation Coefficient

Wallbridge Mining  East Africa

Modest diversification

The 3 months correlation between Wallbridge and East is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wallbridge Mining and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals and Wallbridge Mining 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 Wallbridge Mining are associated (or correlated) with East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Wallbridge Mining i.e., Wallbridge Mining and East Africa go up and down completely randomly.

Pair Corralation between Wallbridge Mining and East Africa

Assuming the 90 days horizon Wallbridge Mining is expected to generate 405.74 times less return on investment than East Africa. But when comparing it to its historical volatility, Wallbridge Mining is 9.79 times less risky than East Africa. It trades about 0.0 of its potential returns per unit of risk. East Africa Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10.00  in East Africa Metals on September 13, 2024 and sell it today you would earn a total of  1.00  from holding East Africa Metals or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Wallbridge Mining  vs.  East Africa Metals

Wallbridge Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallbridge Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Wallbridge Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wallbridge Mining and East Africa

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

The idea behind Wallbridge Mining and East Africa 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.