Correlation Between Western Metallica and IA Financial

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

By analyzing existing cross correlation between Western Metallica Resources and iA Financial, you can compare the effects of market volatilities on Western Metallica and IA Financial 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 Metallica with a short position of IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Metallica and IA Financial.

Diversification Opportunities for Western Metallica and IA Financial

0.13

Correlation Coefficient

Western Metallica  IA Financial

Average diversification

The 3 months correlation between Western and IAG is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Western Metallica Resources and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial and Western Metallica 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 Metallica Resources are associated (or correlated) with IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Western Metallica i.e., Western Metallica and IA Financial go up and down completely randomly.

Pair Corralation between Western Metallica and IA Financial

Assuming the 90 days horizon Western Metallica Resources is expected to generate 7.57 times more return on investment than IA Financial. However, Western Metallica is 7.57 times more volatile than iA Financial. It trades about 0.03 of its potential returns per unit of risk. iA Financial is currently generating about 0.01 per unit of risk. If you would invest  2.50  in Western Metallica Resources on December 20, 2024 and sell it today you would lose (0.50) from holding Western Metallica Resources or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Western Metallica Resources  vs.  iA Financial

Western Metallica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metallica Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Metallica showed solid returns over the last few months and may actually be approaching a breakup point.

iA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days iA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IA Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Metallica and IA Financial

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

The idea behind Western Metallica Resources and iA Financial 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.