Correlation Between West Red and Peloton Minerals

Can any of the company-specific risk be diversified away by investing in both West Red and Peloton Minerals 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 West Red and Peloton Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between West Red Lake and Peloton Minerals, you can compare the effects of market volatilities on West Red and Peloton Minerals 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 West Red with a short position of Peloton Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Red and Peloton Minerals.

Diversification Opportunities for West Red and Peloton Minerals

0.49

Correlation Coefficient

West Red  Peloton Minerals

Very weak diversification

The 3 months correlation between West and Peloton is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding West Red Lake and Peloton Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Minerals and West Red 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 West Red Lake are associated (or correlated) with Peloton Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Minerals has no effect on the direction of West Red i.e., West Red and Peloton Minerals go up and down completely randomly.

Pair Corralation between West Red and Peloton Minerals

Assuming the 90 days horizon West Red is expected to generate 2.61 times less return on investment than Peloton Minerals. But when comparing it to its historical volatility, West Red Lake is 1.36 times less risky than Peloton Minerals. It trades about 0.04 of its potential returns per unit of risk. Peloton Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.60  in Peloton Minerals on December 21, 2024 and sell it today you would earn a total of  0.90  from holding Peloton Minerals or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

West Red Lake  vs.  Peloton Minerals

West Red Lake

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in West Red Lake are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, West Red may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Peloton Minerals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peloton Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Peloton Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with West Red and Peloton Minerals

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

The idea behind West Red Lake and Peloton Minerals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.