Correlation Between Western Copper and Transatlantic Mining

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

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

Diversification Opportunities for Western Copper and Transatlantic Mining

-0.23

Correlation Coefficient

Western Copper  Transatlantic Mining

Very good diversification

The 3 months correlation between Western and Transatlantic is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Transatlantic Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transatlantic Mining Corp and Western Copper 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 Copper and are associated (or correlated) with Transatlantic Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transatlantic Mining Corp has no effect on the direction of Western Copper i.e., Western Copper and Transatlantic Mining go up and down completely randomly.

Pair Corralation between Western Copper and Transatlantic Mining

Assuming the 90 days trading horizon Western Copper is expected to generate 6.1 times less return on investment than Transatlantic Mining. But when comparing it to its historical volatility, Western Copper and is 3.99 times less risky than Transatlantic Mining. It trades about 0.09 of its potential returns per unit of risk. Transatlantic Mining Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Transatlantic Mining Corp on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Transatlantic Mining Corp or generate 71.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Western Copper and  vs.  Transatlantic Mining Corp

Western Copper

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Copper and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Western Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Transatlantic Mining Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transatlantic Mining Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Transatlantic Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Copper and Transatlantic Mining

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

The idea behind Western Copper and and Transatlantic Mining 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.